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We should consider GDP growth, because if debt stays constant but GDP decreases the debt to GDP ratio grows. When GDP grows, debt-to-gdp decreases year-on-year even if the budget surplus/deficit is zero.

The brainless should not be in banking -- Willem Buiter
by Migeru (migeru at eurotrib dot com) on Sat Mar 20th, 2010 at 06:23:59 AM EST
[ Parent ]
I did take that into account a bit because Greece did report a flatline of .1% growth.

I really will give up on this. I think what happens is as warren Buffet said, "When the tied goes out, we see who is swimming naked." 100% debt to GDP is ok when your economy is growing. When times get tough, it's a scandal.

by Upstate NY on Sat Mar 20th, 2010 at 11:30:35 AM EST
[ Parent ]
How about the interest on the debt? Should we take that into account, too?

The brainless should not be in banking -- Willem Buiter
by Migeru (migeru at eurotrib dot com) on Sun Mar 21st, 2010 at 08:00:29 AM EST
[ Parent ]
Right, but since the interest rate just went up for the first time in the latest deals in the last 2 months, we can assume that they had a much similar interest rate to Portugal and Spain prior to that. And this would mean that the budget reflects that lower interest rate. You're correct that future budget projections will naturally be worsened by much higher interest rates, but I just don't think it has been a factor looking backward.
by Upstate NY on Sun Mar 21st, 2010 at 11:00:00 AM EST
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