19 February 2010
	101 Greece debt problem By Evan Pickworth

Why is Greece's debt our problem? If Greece defaults, the euro is likely to be smacked and there could be global contagion, as was the case with Argentina's default. The rand would come under pressure, given SA's eurozone economic links and emerging-market status. It is important for the EU to bail out Greece and avert another global financial crisis, which would trigger "double-dip" recession. What do the Greeks need to do to get out of the mire? The government has been forced to commit to reducing the budget deficit to try to put Greece's public finances on a more sustainable footing. The plan projects that the budget deficit will decline from 12,7% of GDP in 2009 to 8,7% of GDP in 2010 and to below the EU's limit of 3% by 2012. How big is the problem? Total government debt and interest payments make up 115% and 5% of GDP respectively. GDP contracted 0,8% in Q4, more than was feared, and the government last Friday revised the previous three quarters' GDP down sharply as well, sending the euro to an eight-month low (US$1,35/à). Can it be fixed? The EU has pledged to stand by the country to reduce the fallout, but Germany and the European Central Bank want stronger measures such as a rise in Vat and wage cuts in return for financial assistance. Source: Nedbank's Economics Unit, FT