Greece’s woes are not getting any better, whether or not the nation is targeting more budget cuts. Those budget cuts even create a catch-22. As government spending goes lower, so does gross domestic product. As GDP goes lower, more austerity cuts are needed. And this morning’s headlines now show that Greece saw its GDP fall in the second quarter by 6.2%.
Today’s news only complicates the efforts of the government, and the government coalition is already one that would be described at best as fragile. About the only good news is that the drop in GDP compared to 6.5% in the first quarter and to 7.5% in the fourth quarter of 2011.
Having two elections in a row did not help things on the GDP front. Weak tourism is being met with new tax measures. We reported last week that unemployment was 23.1% in Greece, and S&P cut its outlook last week on the nation as well.
We have yet to see any wild trading in shares of National Bank of Greece SA (NYSE: NBG) nor in Global X FTSE Greece 20 ETF (NYSEMKT: GREK), but that is likely where you will see the moves if there is a big reaction.
JON C. OGG