One of SocGen’s in-house uber-bears Dylan Grice (Albert Edwards is the other one), has a warning for countries around the world.
If it can happen in Greece, it can happen anywhere.
FT Alphaville has the report, which essentially boils down to the fact that a country’s rate of interest payments must equal its nominal growth rate :
If it does, the incremental government revenue generated by the economic growth will pay for the coupons on the debt. If it doesn’t, a shortfall develops between incremental revenues and incremental coupon payments and in the absence of further austerity, more debt is required to finance the deficit.
But it’s not just about getting this year out of the way. If it can happen in Greece, it can happen everywhere else too, because Greece just isn’t that different.
OK, so it misrepresented the size of its liabilities but so too do most other governments; its real fiscal problems are hidden off-balance sheet in the enormous welfare obligations it can’t afford to pay and so are most other governments; its debt maturity isn’t notably different from the rest of the OECD’s (at about eight years it’s actually longer than those of the US and of Japan); and its projected budget deficit is lower than those projected in the UK and the US (third chart inside).
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