Greece in the Doldrums

The Independent is reporting about the Greek financial crisis and prospects for the eurozone. The piece notes that "Athens is already facing possible sanctions from Brussels for running a deficit way above the 3% maximum of GDP permitted under the eurozone stability rules. But the true scale of the problem is worse than expected - at nearly 13%. Greek government debt is also off the eurozone scale at well over 100% of GDP - compared with the maximum permitted debt ceiling of 60%."

Der Speigel had an excellent article a couple of days ago on the same topic, calling the situation a "ticking time bomb." What is surprising is the extent to which the numbers were off the projections - how on earth does the budget deficit go from a projected 6% to the actual 12.7% of GDP? Greek numbers have been dodgy right from the time it qualified for the currency union, and this recent instance of skulduggery will only undermine international confidence in its reporting mechanisms even more.

There is a real prospect that the country may become insolvent with adverse consequences for the system as a whole. Does systemic risk justify intervention at the EU level to bailout Greece? If yes, would other states ask for handouts too? What about Ireland? There are no easy answers to these tricky questions.