Not even 6 hours after the PSI exchange offer details, and already the true Greek problem rears its head. Because it is not the crushing debt coupon that is the primary threat to Greece: cutting the cash coupon from infinity to 2.6% is welcome, but utterly meaningless if the debt load is still intolerable (as a reminder, just the Troika DIP is about 130% of Greek GDP, meaning all junior debt is worthless as confirmed by the trading price of the New Greek debt in the 15 cents on the euro region). No - the true threat to the Greek economy is that nobody wants to work anymore. Sure enough, the previously reported -7.0% contraction in Q4 GDP has just been revised to -7.5%. From Reuters: "Greece's gross domestic product (GDP) contracted by 7.5 percent year-on-year in the fourth quarter of 2011, the country's statistics office said on Friday based on seasonally unadjusted provisional estimates. The contraction, which followed a 5.0 percent GDP decline in the previous quarter, was deeper than a previous Feb. flash estimate of -7.0 percent." And one can be absolutely certain that this number will be revised far further lower when all is said and done. Also, with recently released Greek PSI data coming at an all time low, we wish Greece the best of luck in achieving that -1.0% GDP growth in 2013 as per the IMF's downside case. Finally, this explains why the NEW Greek debt is trading with an implied redefault probability of 98%.
Here is how Greek GDP looks by quarter in 2011:
Q1: -8.0%; Q2: -7.3%; Q3: -5.0%; and Q4: -7.5%