Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

At a stroke the budget revisions for 2009 took Greece’s debt burden from 99 to 115 percent of GDP. Deficits running into the tens of billions adding continuously to the existing stock of debt, combined with surging interest rates, would soon make the problem impossible to contain. In 2010 alone Greece was due to make repayments totaling a massive 53 billion euros. That would have placed a strain on any borrower. But Greece’s problems were not due to illiquidity. It was insolvent. To actually stabilize its debts it would, according to one calculation, need to raise tax revenues by 14 percent of GDP and cut expenditure by the same amount. That was politically impossible. What Greece needed to do was to restructure, to agree with its creditors to reduce their claims. To do anything else, to add new loans to an already insupportable debt burden, would postpone the problem but at the price of increasing its scale.