Why is he smiling?

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Charting Greece's Frightening Future

Mark Whitehouse writes editorials on global economics and finance for Bloomberg View. He covered economics for the Wall Street Journal and served as deputy bureau chief in London. He was previously the founding managing editor of Vedomosti, a Russian-language business daily.
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Greece and its creditors would do well to step back and survey the wreckage as they enter yet another week of brinkmanship: Data on capital flows suggest they've undone years of confidence-building in a matter of months.

Greece's Fiscal Odyssey

Haggling over the terms of loans from Germany and other official creditors is bringing Greece ever closer to a worst-case outcome: a default on its debts and possibly its exit from the European Monetary Union. The protracted uncertainty itself is taking a toll. Worried depositors and investors are moving their euros out of Greece to safer places such as Germany, depriving the Greek economy of the private investment it desperately needs to grow.

Data from the Greek central bank, which records each euro that leaves the country as a liability, suggest the capital flight has reached unprecedented proportions. Over the six months through March, about 62 billion euros ($67 billion) were taken out of Greece. That's the equivalent of about a third of the country's gross domestic product. Here's a chart:

It's hard to know when the exodus will end. Even if Greece and its creditors get past the current impasse, they will almost certainly have to start negotiations on a longer-term program to address a debt burden that, at more than 175 percent of GDP, remains far too large.

As Bloomberg View has argued, a better approach would be for Europe to focus on a final deal -- including significant debt relief -- that would quickly put Greece on a realistic trajectory toward solvency and economic recovery. The longer the bickering goes on, the more unnecessary damage will be done, eroding whatever benefits either side might hope to gain.

(Corrects chart in article published April 20; the percentages were originally calculated using an inaccurate GDP number. Corrects share of GDP in third paragraph.)

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Mark Whitehouse at mwhitehouse1@bloomberg.net

To contact the editor on this story:
Max Berley at mberley@bloomberg.net