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Greece's 2009 Budget Deficit Was Just Revised From 12.2% To 16% Of GDP

Tyler Durden's picture




 

Goldman's Erik Nielsen lands the bombshell that the Greek deficit mysteriously increased from €29.4 billion to a shopping €37.9 (keep in mind, this is not Bernanke notation where only quad- prefixes impress people at this point). This increases the (running) 2009 budget deficit from 12.2% to 16%! While certainly not the last time we hear of "prior revisions", the question of just how patient Germany will be, should this number approach, oh say, 50% once the artificial support of various Goldman swaps expires (and at 50% the BSDs like Goldman will surely round up to 100%), is very much open.

From Goldman's Erik Nielsen

Big revision up in their 2009 fiscal deficit: Late yesterday, the Greek finance ministry amended its website for its 2009 fiscal cash execution, adding close to EUR 6bn to expenditures in December for a total of EUR 11.8bn, which takes the full-year deficit to EUR 37.9bn - up from EUR 29.4bn reported previously.  This implies an increase in their 2009 central government budget deficit from about 12.2% of GDP to about 16% of GDP.  There has been made no explanation for this revision, but we think it may be associated with payment of arrears to hospitals, which means that the general government deficit may have increased by less.  Regardless, given the uncertainties, it is a stunning revision to make to the December payments without an explanation.  Hopefully, it’s a good use of money, like clearance of arrears, but it would be good to know.

Latest thought on tomorrow's summit: Meanwhile, rumours are all around with respect to a possible bail-out package from the EU.  My view remain the same, namely that money will be made available eventually, if needed (probably by end of March), although I hope they get comfortable with their estimate of how big the whole is that they need to fill.  Importantly, however, I don't think they are ready to commit yet.  Therefore, tomorrow's summit is likely to be somewhat disappointing for the market because the political leaders are unlikely to agree to more than some guidelines for how a rescue plan might take place.  A firm commitment is virtually impossible, partly for the reason that bilateral lending would have to be approved by the national parliaments, if it goes beyond small amounts inside their cash holdings for a very short term.  And this process has not yet started in any of the countries, although the German finance ministers is reported to have been speaking with the conservative fraction in the German parliament this morning.  I believe that outstanding issues include (1) the size of the loan or guarantee (I think something like EUR20bn is likely); (2) burden sharing between the other Euro-zone countries (Germany and France will be the heavyweights but other Euro-zone countries will surely participate as well); (3) the terms of the money (I expect it'll be short term, maybe 6 months with a decent spread); and (4) conditionality (tough, including specific commitments to do still more if execution should fall short of estimates.)  Whether they'll agree on all this tomorrow, I rather doubt - and I very much doubt that we'll get anything like this degree of details in their statement.  But then again, a statement of "conditional support in principle" might be enough to sustain this rally.  We shall see.

Stay tuned

h/t Chris

 

 

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Wed, 02/10/2010 - 10:11 | 224775 Nout Wellink
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Oh, oh..... And how about Dubai, back in the picture? Watch:

http://www.cnbc.com/id/35326845

Wed, 02/10/2010 - 10:12 | 224776 dan22
dan22's picture

If the European leaders want to maintain the Euro as some chain which connects fundamentally different economies then they must learn that a chain is only as strong as its weakest link. For instance, a building isn't well protected if its security system has one flaw--say, an easily weak lock--that allows unauthorized entry, no matter how elaborate and expensive the rest of the system is. No matter how strong someone or something is strong, it is always limited by its weakest attribute. The strength of a chain is determined by its weakest link and in this case it means that if Germany will back the Greek government than the Euro should be as strong as the Greek Economy.

http://israelfinancialexpert.blogspot.com/2010/02/greek-bailout-will-not-prevent-collapse.html

Wed, 02/10/2010 - 10:40 | 224825 yellow submariner
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I dont believe, that the "weak link" analogy can be applied. It is too simplistic.

As a German I think that the Euro and the Greece crisis simply save our economy. Our economy is mainly founded on exports ;). Without the PIIGS our currency would skyrocket making our goods unaffordable to the rest of the world. Other countries like Japan have to buy a lot of dollars to kepp their currency low. We get it for free and Greece is paying nice spreads to our banks.

A greek default has to be avoided from the german point of view, because it would be a greater shock to the economies of europe than the Lehman default. Moreover it would be a also a greater shock to the US.

I think the solution will be a mixture of your points 2, 3 and 4: moderate help for Greece, less moderate devaluation of the EUR and harsh spending cuts for Greece, which has betrayed the europeans with false budgets for a decade.

Wed, 02/10/2010 - 11:13 | 224869 Assetman
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I agree with you that the analysis based on the "weak link" theory is not simplistic in realistic terms, I think you vastly overestimate the impact of the PIIGS on your exports.

No doubt there will likely be a currency effect-- but exports clearly don't drop to zero if/when the Euro strenghtens 20%.  The fact of the matter is that Germans still produce goods that will be in demand, and there are still other major deficit-driven economies in the EU that will maintain pressure on the Euro.  If the Euro gets stronger by 20%, I'd highly doubt exports drop by the same amount... unless the world is caught in the throws of a major depression.

What you don't want to see are a chain of events where blank checks are written for a number of EU/PIIGS based on what is now happening with Greece.  There's a reason the EU has tried to adhere to sovereign deficit to GDP levels, though it seems the Germans are the only ones trying to comply. 

I think the EU would do better in the long run taking  actions that help to stabilize its currency, versus allowing actions to transpire to allow it to free fall.  Once you cross the rubicon of kicking the can down the road, you'll realize the error of your ways.

Wed, 02/10/2010 - 11:52 | 224959 yellow submariner
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Assetman wrote: "I think the EU would do better in the long run taking actions that help to stabilize its currency, versus allowing actions to transpire to allow it to free fall. "

Of course the free fall of the european currency has to be avoided. However I think market will pin the value of the Euro to a level coresponding to the average economic strength of the Euro-countries. This averaging will IMHO prevent a free fall of the Euro.

Wed, 02/10/2010 - 15:24 | 225321 Assetman
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You're assuming that investors are rational, which in the long run may be true.  I don't think investors will be anywhere close to rational when mutiple PIIGS dominoes start to fall, though.

That's OK though, Timmy Geither will greatly appreciate the increased interest in his freshly issued "riskless" US Treasury debt back in the world's reserve currency, because it we know that China isn't willing to supply all the demand themselves.

Thu, 02/11/2010 - 06:07 | 226408 yellow submariner
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Agreed. In the short term we will see a lot of turbulence in the EUR/USD exchange rate.

Wed, 12/15/2010 - 06:04 | 807428 Karston1234
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A firm commitment is virtually impossible, partly for the reason that bilateral lending would have to be approved by the national parliaments..High School Diploma | Online GED | Online homeschooling

Wed, 02/10/2010 - 10:15 | 224778 Youri Carma
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How Goldman Sachs Helped Greece to Mask its True Debt - 8 February 2010 (Der Spiegel) http://www.spiegel.de/international/europe/0,1518,676634,00.html

Wed, 02/10/2010 - 11:00 | 224854 Anonymous
Anonymous's picture

I also remember reading a few months ago that the country had taken on a huge amount of short-term debt, which it kept off-balance sheet. The reason for keeping it off-balance sheet was that the loan was very-short term and needed to bridge current expenditures and revenues that were expected within weeks or months. Of course, what happened is that this short-term debt ballooned and was constantly being rolled over, while remaining off-balance sheet. I guess it is also things like that that keep being added to the debt. Sorry, I cannot find the reference.

Wed, 02/10/2010 - 10:21 | 224792 Charley
Charley's picture

<sarcasm=on>I guess Greece is just going to have to wind down its committment to NATO and its military modernization program.</sarcasm>

Wed, 02/10/2010 - 10:22 | 224796 Anonymous
Anonymous's picture

Ah Gamoti.

Wed, 02/10/2010 - 10:24 | 224799 fedusw (not verified)
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In the USA case...the government decides to print $12 Trillion while the total economy is at $40 Trillion....which because of dilution...wealth is transferred amongst the haves and have nots....BUT the real economy does not change and stays at $40 Trillion.... Financial Crisis to worsen

Wed, 02/10/2010 - 10:51 | 224845 Anonymous
Anonymous's picture

every crisis is going to be used to create change/direction, etc...

i'm just wondering how the 'big people' will use the situation in greece.

perhaps 3 months from now, Obama comes on TV and says "we can't let what happened to greece happen to the US...so we need to invest in more stimulus..."

Will PIIGS become the poster-child of what happens when gov'ts don't step in to help?

People will then WANT the gov't to step in..."we can't let what happened to greece happen to the US....please save us Wash DC!"

Just mixin the pot here folks...

Wed, 02/10/2010 - 11:39 | 224924 Assetman
Assetman's picture

Don't worry... Obama won't need the Greece as a shining example as a reason for more stimulus.  There are enough internal triggers to start an aversion to the global risk trade... it's just that the problems in Europe right now are convenient for the U.S. so it helps fund tons of low cost Treasury debt.

Nope, when global interest rates start ticking up in a big way (you know, because financing endless bailouts actually comes at a cost), these risk assets will fall very hard.  Once the Dow gets to the 6K-7K level (or lower), there will be plenty of people in the US who will be clamoring for the next stimulus.

Wed, 02/10/2010 - 21:45 | 226037 Anonymous
Anonymous's picture

Greece sucks.....BUY American debt... mission accomplished ben...

Wed, 12/15/2010 - 06:05 | 807429 Karston1234
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Just continue writing this kind of post. I will be your loyal reader. Thanks again.
Earn Diploma | Accredited High School Diploma

Wed, 02/10/2010 - 11:14 | 224874 Anonymous
Anonymous's picture

The engineered crash not having an effect on 10 year & 30 year interest rates ?? Now whats the gubmint to do ??

Wed, 02/10/2010 - 11:16 | 224881 Anonymous
Anonymous's picture

OPA!

Wed, 02/10/2010 - 11:25 | 224888 Postal
Postal's picture

A "bombshell" is a blond Hooter's girl or a redheaded stripper, not a gov't finance talking head admitting accounting problems.

Wed, 02/10/2010 - 11:27 | 224891 bugs_
bugs_'s picture

As the Greeks feel more confident about
their bailout they will disclose more
truth about how deep in the hole they
truely are.  Expect more "revisions".

Wed, 02/10/2010 - 14:09 | 225163 carbonmutant
carbonmutant's picture

Hmmmm...

Wed, 02/10/2010 - 11:43 | 224934 Anonymous
Anonymous's picture

If California can go bankrupt, then why not Greece? I dont understand. They have to play bythe rules. Otherwise, why did they join the common market? Let them form a common market with Macedonia and Albania alternatively. What does Greece want from GroSSDeutschLand anyway? The Greeks dont even consider themselves european.

Wed, 02/10/2010 - 14:12 | 225168 carbonmutant
carbonmutant's picture

The California legislators are expecting a stick save prior to the November elections just to show the morts that the "girls in DC" can deliver.

Wed, 02/10/2010 - 15:07 | 225289 BlackBeard
BlackBeard's picture

hee hee...oops!

Mon, 04/19/2010 - 10:36 | 307912 Tom123456
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