A lot of time has been devoted to words over the past few days in Athens and other European capitals. Perhaps spending some time considering a few numbers might prevent Greece and its European partners soon having nothing left to say to each other.
Even the most faithful party apparatchik, blinded by an unexpected electoral victory or crushing defeat on May 6 could not fail to see that Greece faces the most urgent of economic problems. Figures released on Tuesday morning revealed that the Greek economy had contracted by 6.2 percent of GDP in the first quarter of 2012 compared to a year earlier. Many economists believe the economy will shrink by about 7 percent of GDP this year unlike the troika’s forecast for a contraction of under 5 percent.
The continuing deep recession is making any effort to boost public revenues a hopeless task. With revenues struggling, the weight is falling on public spending but Greece’s decision makers and its public administration have been unable to find smart and effective cuts to make. The public investment program, for instance, has been chopped to bits as a last resort, leaving almost nothing standing. The result is that Greece is still spending more than it can earn. Statistics published last week put the primary deficit (which does not include interest payments) for the first four months of the year at 1.68 billion euros. This is a significant improvement on last year when it stood at 3.56 billion euros during the same period but it still means that Greece is due to spend at least 5 billion euros more than it will raise in revenues this year.