Financial markets can pay as much attention to words as they do to data. The unfolding Greek tragedy is a case in point.
When the growing budget gap in Greece first rattled investor sentiment, the Greek finance minister used a weird analogy to explain to the outside world what had gone wrong and what would be done to set things right: “We’re trying to change the course of the Titanic...” Jaws dropped in disbelief at the image of a country about to ram into an iceberg.
Greece has had many ups and downs since then, leading to the spending cuts and tax increases announced on Wednesday.
But the adjectives have not got any milder. The Greek Prime Minister described the crisis as a “wartime situation” and a “catastrophe” while telling citizens that “the survival of our country and economy” was at stake.
Managing market expectations is complicated. Tell too little and investors get suspicious. Tell too much and they panic. Greece seems to be struggling with this dilemma right now.