Wall Street Journal
August 6, 2010
So far, so good. Greece has received a glowing report from the European Commission, European Central Bank and International Monetary Fund. The country met the end-June targets under its €110 billion ($144.8 billion) support package, with its efforts described as "vigorous" and "impressive." The possibility that Greece will actually perform better than expected is growing. But it may take time for bond markets to realize that.
The IMF's assumptions have already seen one huge revision: Inflation in 2010 is now expected to be 4.75%, versus 1.9% previously, due to tax increases. That means nominal gross domestic product is unlikely to shrink this year, lowering the debt-to-GDP ratio to 129% from the forecast 133%. That could also help Greece to beat its 8.1% budget deficit target given good progress in the first half of the year and with revenues expected to grow faster in the second half as further tax rises kick in.
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