Greece to follow many emerging EU economies along the hard path of fiscal adjustment

With concerns over the sustainability of the fiscal position in Greece having now spread to several other Eurozone countries, it is worth comparing recent developments in this group of countries with the EU emergers outside of the Eurozone. All these countries might be considered to have entered the...

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Bibliographic Details
Published inEmerging Markets Weekly p. 1
Format Report
LanguageEnglish
Published Oxford Oxford Economics Ltd 15.02.2010
Subjects
Budget deficits
Debt
Economic crisis
Eurozone
Fiscal policy
GDP
Government
Gross Domestic Product
International finance
Recessions
Securities markets
Statistical data
Greece
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Summary:With concerns over the sustainability of the fiscal position in Greece having now spread to several other Eurozone countries, it is worth comparing recent developments in this group of countries with the EU emergers outside of the Eurozone. All these countries might be considered to have entered the global crisis with significant economic imbalances, typically shown up by very large current account deficits. When the global financial crisis erupted in September 2008, many of the EU emergers were running massive current account deficits. By contrast, the members of the Eurozone that were running large current account deficits in 2008 were not subject to the same financing pressures as those outside the area, although they were affected by other aspects of the crisis. As a result, while Greece and Latvia both experienced similar deteriorations in their budget deficits in 2009, in Latvia this was associated with an 18% contraction in GDP but in Greece GDP only probably fell by 1%-2%.