We argued here last week that the Hungarian economic situation is challenging but not necessarily similar to Greece’s. The same is true for Bulgaria. The EU commission suspects that the budget numbers produced by the Bulgarian authorities are incorrect and should be revised upwards. This is obviously bad news and there may be some really serious issues behind the revision. But that does not make Bulgaria into Greece. The latter suffers from a structural debt problem – with sovereign debt expected to reach 150% in a few years – whereas the former has one of the smallest public debt figures in Europe at less than 15% of GDP. These differences do matter when analyzing the severity of the problem and how long it may take to correct the problem.
There is one common denominator in Greece, Hungary and Bulgaria and that is that the authorities knowingly or unknowingly have presented incorrect economic statistics. That points to incompetence or poor judgment or both. It is not necessarily the present governments fault but that does not really comfort financial markets. So, it is probably a good idea that the EU Commission will start to scrutinize the numbers more closely. That should hopefully work as a deterrent so that we can avoid these things in the future.
