Here’s one simple graph that reveals an awful lot about the mess in Greece. It shows how Greek GDP has changed over the last few years and how well the experts of the European Commission, the European Central Bank and the International Monetary Fund (collectively the ‘Troika’) have forecast it since the start of the crisis.
It’s not too easy to read but the black line is the actual change in Greek GDP (expressed as the percentage change on the previous year) and goes from a little over 3.5% in 2007 to around -7% in 2011. The dotted red lines are successive annual forecasts from 2008 to 2012 (H/T Zero Hedge/Follow the Money).
Obviously, the Troika is totally and consistently incompetent at forecasting. To be so reliably bad it must be sticking to a wholly wrong theory of how an economy works. It’ as bad a series of misses as you would expect if NASA was trying to send a probe to Mars while remaining unshakably convinced of the Ptolemaic theory that the Sun and other planets go round the Earth.
The only other reason I can think of is that these were never intended to be serious forecasts at all; that they were just a way of dressing up a real strategy that dare not speak its name – for instance that it was a way for those calling the shots (i.e. largely France and Germany) to save their banks from bankruptcy by buying time for them to get their money out of Greece and dump the losses onto unsuspecting Eurozone taxpayers.
The two explanations are not mutually exclusive so could both be true. That would be my bet but either way how much longer can it go on? The new Chinese leadership is apparently reading de Toqueville on the causes of the French Revolution. EU leaders should join them.