Monday, 15 February 2010

Debt reporting: the snowball effect

Reuters just reported that Eurostat has asked Greece for explanations on its derivatives contracts and how this is accounted for in its debt figures. (EU asks Greece to explain derivatives reports).

Doesn’t Eurostat read the Greek press? This news is nearly a month old. Does the information have to be published in Bloomberg or the NY Times for it to become “news”?

I suppose that, after agreeing to Greek economic statistics for the past 8 years, we can assume that Eurostat does not read Greek news.

How long will it take for the full story to break? And what consequences will this have on the Ecofin and Eurogroup meetings this week, and on Greek bonds? Unless there is a specific commitment to Eurozone purchases of Greek debt (probably on a government-to-government basis), then the Athens Stock Exchange will fall still further.

I don’t expect the meetings today to go very well, however. This is death by a thousands cuts: the government has clearly lost control of the information cycle, and is trying to convince its partners that its' debt is really what it has recorded. Unless there is a major financial commitment this afternoon or Wednesday at the latest, this could be "Black Monday" all over again.

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