Remember all those lies about how the Greek economy was going to grow and stuff? Here is the truth: the latest Bank of Greece report shows Greek GDP to shrink about 4% this year and unemployment to exceed 12%. And it is enough to blow Greek spreads out by 25 bps and growing. Below are the summary points from the report which is the first step to uncovering the true devastation sweeping the country. Elsewhere, Kathimerini reported that delays in the collection of taxes in Greece may cause a EUR 900mln shortfall in 2010 causing further widening in spreads.
From the report:
- Greek economy to shrink less intensively in 2011.
- Greece has no room for further tax increases.
- Eurostat Greek deficit revision may affect 2010.
- Greek fiscal adjustment must focus on spending curbs.
- Greece has long and hard road ahead.
- Greek banks must maintain high capital adequacy.
At last check, Greek spreads were at 715 bps, +25 on the day.
We are now convinced Greece will be the sacrificial lamb to restart the European crisis and to resume the EUR's slide back to parity with the dollar. Such is life when one's central bank is unable to print $4 trillion due to actual resistance to the tyrrany of a few not so good ad bankers.