The Economy of Greece
The Hidden Deficit
In 2009 a new government revealed that the budget deficit was far larger than previously reported, shocking investors.
Trust collapsed overnight.
The revelation
The 2009 deficit was revised upward to over 15 per cent of GDP, several times the euro area limit.
Debt levels
Public debt was well above 100 per cent of GDP.
Market reaction
Investors demanded much higher interest on Greek bonds.
Lesson
Reliable statistics are essential for market confidence.
A bond spread
Greek 10-year bond yields jumped far above Germany's, signalling risk of default.
Ignoring data quality
Bad data can trigger a crisis.
Key takeaways
- The deficit was revised upward.
- Debt was very high.
- Bond yields soared.
- Statistics matter.
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