Greek ratings go north

[DaveR]

"DaveR, the primary engine for overblown Greek debt wasn't the Euro, but that it quite simply lied on it's self-certified credit assessment.

In 2009 the new government announced debt was 12.9% of GDP, not the 3.6% the previous government bad claimed. In other words it had persistently deceived banks about its ability to manage debt (and the size of that debt). It was this deception that created the crisis - date quite clearly to October 2009 - not the low interest rates achievable with the Euro.

It was immaterial what currency that deception was played out in.

People are trying to rewrite history to claim the single currency was at fault. It wasn't.

In the aftermath the single currency certainly made it impossible to devalue - a strategy that would have been used historically to manage the situation (but then devaluation is financial nuclear war anyway, so the Greeks would have been no better off).

It also made it more difficult to balance the economy internally by manipulating exchange rates to drive internal productivity."

I'm afraid you're just wrong. It was the 2009 budget deficit that was revised upwards from 3% to 12% (and ultimately 15%). Debt was already running at over 100% of GDP. Greece had borrowed steadily throughout the 80s and 90s but had also experienced a series of devaluations, including in 98, just prior to joining the euro. It was well known in 98 that Greece had not met the criteria for euro membership (either debt or deficit) and it was subsequently well known that the SGP requirements were not enforced. Of course the Greek governments lied about debt and deficit levels, but the reason nobody cared and kept lending was essentially because they were buying euro denominated bonds, rather than drachma.

[Huguenot]

Isla, my first post was hardly 'taunting' was it?

That would be silly hyperbole on what was never more than a wry aside.

By making such an exaggerated claim, it's you that's polarising the debate and fuelling the flames of 'unpleasant stuff'.

I don't know what you mean by 'not paying off the loan' - a debt write off is the same thing (often referred as 'taking a haircut') and that has already happened once, and probably will do again.

Whether the Greeks will be in the same place in 10 years time is entirely up to them, not the common currency. They will need to balance the books between government income and expenditure.

[Huguenot]

DaveR, apologies for the careless short hand regarding the term 'debt', I think it's persistently clear in the thread that I'm referring to the ability of the Greek government to balance its incomings and outgoings (in other words budget deficit).

I totally agree with you that investors were more confident in the Euro than the Drachma - investors built misguided confidence that they were no longer risking devaluation as a form of managed default.

As they discovered, avoiding devaluation was no better guarantee against default in Greece than simply checking whether the nation was credit worthy. It wasn't.

The fault doesn't lie with the Euro for this: the Greek government deceived greedy investors.