On Sunday Greeks will go to the polls to elect a new government. Generally Greece is thought to be the basket case of the Eurozone with borrowing out of control, whilst reluctant to reorganise its economy to be more productive so that it can pay down its debts and improve its living standards. Such is the level of austerity imposed by its Eurozone paymasters, principally Germany were austerity is good, the likelihood is the election of a left leaning government which, if it does not get what it wants, will default. What it wants is an even bigger write down than it has received already.
First we have to see what happens in the election and then we shall have to see, if the left wins, who blinks first in the poker game which the negotiations will become. Greece leaving the Euro is back on the agenda. In fact Greece’s problem is not debt, it is part GDP and part a complete failure of its tax collection system to the point where it cannot finance anything without borrowing because people do not pay their taxes as a matter of cultural habit.
If you look at the league table of total external debt, Greece is way better than the UK. Greece has a ratio of 1.7x GDP, whereas the UK is nearer 4.5x GDP. Those figures count all borrowing including households and businesses. If you include only government borrowing, Greece is much worse. If it could lift its revenue stream and its GDP, Greece would be on the road to recovery. If it crashes out of the Euro it will have to do that. Borrowing will no longer be an option.