CAMBRIDGE – Recently, newspaper headlines declared that Greece would have a balanced budget for 2013 as a whole. The news came as quite a shock: Recall that when Greek officials came clean about the true state of their country’s public finances in 2010, the budget deficit was more than 10% of GDP – a moment of statistical honesty that triggered the eurozone debt crisis. It seemed too good to be true that the Greek deficit would be completely eliminated in just three years.
In fact, it is too good to be true. Any reader who went beyond the headlines soon discovered that the prediction of a zero budget deficit was in fact misleading. The International Monetary Fund was predicting only that Greece would have a zero “primary” budget deficit in 2013.