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S&P: Greece’s fiscal problems differ from Calif.’s

Marketplace Staff May 4, 2011
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S&P: Greece’s fiscal problems differ from Calif.’s

Marketplace Staff May 4, 2011
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STEVE CHIOTAKIS: The first time I ever came to Calif., I got off the plane in LA and said “This looks just like Greece!” The dry air, the climate, the beaches. And the budget problems. But the debt comparison between Calif. and Greece may be a bit overblown. That’s according to a new report from Standard & Poor’s.

And Gabriel Petek is with S&P and he joins us now. Good morning.

GABRIEL PETEK: Good morning.

CHIOTAKIS: Are the comparisons between Greece and Calif. fair?

PETEK: We don’t think so. We think that it’s making some comparisons that are rather superficial. It starts with the fact that Calif. currently produces enough revenue to retire its debt. And we don’t see the same thing for Greece. Greece would really need to have pretty strong reversal and economic growth from its current performance.

CHIOTAKIS: So what are the similarities then between Greece and Calif.?

PETEK: Well, one of the big ones is that both Greece and Calif. do not have their own currency. And they don’t set their own monetary policy. So where some countries may choose to devalue their currency to help generate demand for their exports, both Greece and Calif. don’t have that option.

CHIOTAKIS: The fact though, remains that both Calif. and Greece are finding it hard to reach budget solutions. How much trouble does that spell for Calif.?

PETEK: Well, there’s no doubt about it. Both are probably rightly described as operating in a budget crisis frankly. We belief Calif. can and mostly likely will get through it. It’s more of an open question for Greece. They have some pretty serious problems that are facing them that are more fundamental than what we see in Calif.

CHIOTAKIS: Gabriel Petek with Standard & Poors. Gabriel thanks.

PETEK: Thank you.

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