Friday, February 24, 2012

The worlds inside a Greek GDP warrant

by Joseph Cotterill

Financial Times

February 24, 2012

Let’s start by saying you’re a bondholder mulling Greece’s PSI offer this weekend. (Or you’re Maynard, after a hellish week, reflecting on the offer that you helped to create.)

Remind yourself…

a) You’ve read on the front page of the FT that eurozone creditors are turning Greece (still an OECD state!) into an economic protectorate. To unlock ‘structural’ growth, etc.

b) A protectorate built on… sand. All growth forecasts are stabs in the dark, the Greek body politic no longer responds to orders from its brain, and the weight of history is against successful reform. You know the movie by now.

c) But you have numbers to play with, and some debt relief for Greece.

d) Although… now you also see that a post-default sovereign’s vital stats on inflation, and thus real GDP growth, are a laughing stock in the pages of the Economist. Years after the default. Ghost of Greece’s future? Your future if you hold on to this stuff?

In short, the big picture beyond the highly technical bond math of PSI. Growth.


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