Mist of half-truths hanging over Greece

A NUMBER of presumptions about the state of Greece's economy have been consistently touted as axiomatic truths since the general election on Jan 25. Far from being corroborated evidence, these points need to be delved into in closer detail. It is commonly asserted that the Greek government will never be able to pay back its debt. This affirmation calls for some clarification. A government or state is not the same as either a household or a business. It does not have an overriding urge to reduce its borrowings to zero.

Indeed, modern-day economies, especially when it comes to monetary policy, would not work without public debt. So, the challenge facing a government is not to pay off its debt, but simply to be able to roll over or renew its borrowings regularly. This means when a bond comes to term, the government must be able to issue a new …