It is settled: the only country that may have more pathological liars than the US, is Greece. Eurostat, whose revision of Greek GDP numbers in April was the catalyst that led to the country's insolvency and riots in early May, and subsequent bail out, is on the scene again, and has once again confirmed that Greek authorities can be relied on 100%... to lie. Reuters reports that Greece's much-revised 2009 budget deficit will be set "once and for all" by Eurostat at above 15 percent of GDP, the country's finance minister said on Wednesday. And the revision is certainly a little more than just "modest": "Remember the 2009 budget was projecting a deficit under 3 percent, then a few days before the (Oct. 4) election the reported deficit to the EU Commission was 6 percent," Finance Minister George Papaconstantinou told a conference in Cyprus. "We realised it was over 12 percent. And actually, even after the final revision by Eurostat ... which will validate Greek numbers for 2009 once and for all, it will be above 15 percent. We are talking about a five-fold difference." This is data fudging that will make not only China but the BLS blush with envy.
The response: Greek spreads surge.
The cost of insuring Greek debt against default rose on Wednesday as risk aversion to the sovereign continued to grow after a series of negative comments, while bonds sharply underperformed German debt.
And more from Reuters:
Five-year credit default swaps (CDS) on Greek government debt rose to 720 basis points, up 39 bps according to data monitor Markit. This means it costs 720,000 euros to protect 10 million euros of exposure to Greek bonds. [ID:nLDE69Q14D
The ruling Socialists plan to slash the budget deficit to 7.8 percent of GDP this year and cut it further to 7.0 percent in 2011.
"On the fiscal front nothing is won yet," Papaconstantinou said, while adding: "We are on track and will continue to be on track."
Papaconstantinou told the same economic conference that the country's economy would contract by between 2.5 and 3 percent next year.
In the 2011 draft budget, published earlier this month, the government estimated that GDP would shrink by 2.6 percent next year from a 4 percent contraction in 2010, as an austerity drive takes its toll.
The Mediterranean country's economy has been hit by tough budget cuts prescribed by a 110 billion euro ($153.5 billion) EU/IMF bailout deal agreed to pull the country out of its debt crisis.
"Growth will contract by 4 percent this year, and next year by between 2.5 and 3 percent," Papaconstantinou said.
Keep a close eye on the EURUSD: truthy Greek headlines will not cease until it is back in the 1.1x level.