ECONOMY

Greek external debt rises sharply

Greece’s external debt rose sharply in the second quarter of the year, reflecting the economy’s low competitiveness and its exposure to international money markets and their problems. According to figures made public by the Bank of Greece, the country’s central bank, total external debt (both in the private and public sector) reached 391.1 billion euros, or 163 percent of gross domestic product, in the second quarter of the year, rising 16 percent from the same period a year earlier, amounting to 53.8 billion euros. This follows a 6 percent increase, or a 21.9-billion-euro hike, in the first quarter of the year. The increase is due to higher debt being incurred by the public sector. Data show that the Greek government’s external debt rose to 255.5 billion euros, from 199.9 billion euros in the same period in 2008. Private sector external debt remained relatively unchanged at 135.6 billion euros, down 1.2 percent from 137.3 billion last year, which shows that lending growth in the sector has decelerated sharply due to the financial crisis. On the other hand, the public sector has increased its debt to cover deficits. Greece’s external debt has been gradually ballooning due to the country’s eroding competitiveness and the economy’s structural problems. In 2002, it stood at 143.8 billion euros, rising to 185.9 billion euros in 2004. This also shows that the Greek economy has been growing on borrowed money. The new government to emerge after Sunday’s national elections will need to change this growth model, as everyone knows that it has reached the limit and can no longer contribute to the economy. Experts also highlight that Greece’s heavy reliance on external debt means that problems stemming from international money markets, particularly in times of crisis, almost automatically have an impact on the Greek economy.