Greek 2013 Budget “Cuts” – Completely Misreported, Why Greece Will Collapse

Reuters carries an article the long and the short being that Greece is on the road to recovery, however closer analysis of the article shows how the reporting of the budget cuts is being spun.

Immediately the article exposes the bias of the authors, George Georgiopoulos and Lefteris Papadimas

Greece will unveil a draft budget for 2013 on Monday which will cut deeper into public spending

This is only half of the picture. It was reported only last week that the Troika had rejected half of the cuts outlined by the Greek government and today NewsIT is reporting that the rest of the shortfall will have to come through taxes increases due to the inability of the government to shed any staff.

Greeks are bracing for more pain to bring the country’s public finances closer to a primary surplus – where all spending other than debt interest is covered by taxes – a milestone on the road to coming to grips with its debt mountain.

Again a complete misrepresentation of the situation, although the “primary” budget deficit is often used as a measures of the Greek government’s performance. The primary budget deficit being government spending excluding interest on the debt.

If there is one piece of data that can paint an absurd picture of the Greek governments crisis this is it. The source of the government’s problems is that it can not pay the interest on its debt, to use a figure which excludes interest on the debt is absurd it would for example ignore the fact that the interest payments are 100% of GDP if this were to be the case.

In short the primary deficit is a pointless and misleading measure of the Greek government’s progress especially considering the OECD is forecasting that the interest payments are due to reach 7% of GDP by 2015 even with over optimistic economic contraction figures.

Next year’s budget will include more cuts in public sector pay, pensions and welfare benefits as part of an 11.5 billion euro austerity package of savings that will be spread out over the next two years.

Again the authors George Georgiopoulos and Lefteris Papadimas completely ignore the massive tax increases outlined by the government.

The article then quotes an anonymous government spokesman which is typical behaviour of journalists who are not interested in reporting real news  and are instead mere mouth pieces of government

“This budget will be another step to get the country closer to financial independence, reducing the state’s operating costs,” the official said.

There is no way the Greek government is going to get anywhere near economic dependence, for Reuters to repeat something which is obviously so false is extremely disappointing. The Greek government cannot even reduce their spending by 12 billion Euros let alone make the country economically sustainable.

The article then continues with its blatantly socialist agenda

The EU Commission had forecast an economic contraction of 4.7 percent in 2012 but belt-tightening took a bigger toll on economic activity, suppressing domestic demand and driving the jobless rate to a record 24.4 percent.

Again the authors George Georgiopoulos and Lefteris Papadimas completely ignore the effect of the massive tax increases on the Greek people and instead focus their attention on the negligible reduction in government spending.

This is typical of the reporting in the Greek media where the Greek journalists have a vested interest in portraying the governments problem as a spending cuts problem so as to maintain pressure on the Troika to continue with the bailouts in order for the government to continue to support the dominant trade unions in Greece.

I would have hoped that Reuters would be employing journalists with more integrity that the authors of this article.

In summary the article is a complete sham. It completely and utterly ignores the effects of the massive tax increases, over estimates the size of the government cuts and completely ignores the sky-high interest rate the Greek government is having to pay on its debt in the open market.

The article seems to be designed to paint the most  positive picture of the Greek economy with the goal of encouraging the Troika to continue with the bailouts of the government.

The tax increases over the last year which have inflamed the recession are only going to be followed by an even worse recession as the tax burden continues to increase with these latest increases.

The open market interest costs as a percentage of GDP are only getting worse. To ignore the cost of interest payments on the debt is ignoring the fact that even with ECB intervention the Greek governments financial position is at best the same as it was in 2008. Factor in that interest rates have only one way to go and that the Greek government is not able to borrow on the open market and will not be able to for at least 10 years if the bailouts continue, the situation for the Greek government is completely hopeless.

The only thing that is happening in Greece is that the savings of the people are being slowly eroded away and obviously biased articles like this by Reuters and George Georgiopoulos and Lefteris Papadimas do nothing to help the Greek people understand the predicament they are in. It is hard to imagine how George Georgiopoulos and Lefteris Papadimas could be doing the Greek people a greater disservice.

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