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The 13-Euro Economy

This article is more than 7 years old.

For years, the number 13 has been considered a lucky number in Greece. You could, for instance, become rich by guessing right the outcomes of all 13 picks in the popular PROPO sports game.

Now the number 13 has become a popular number with many restaurants, and it has become popular to charge 13 euros for a set menu that sometimes includes all you can eat and drink.

That's certainly well below the price before the ongoing debt crisis, which hit the country six years ago. "We try to keep prices low, without compromising the quality of our product and services" says Kosmas Rapaj, the chef of Psitos Bakaliaros, a restaurant in Athens, which features a 13 euro menu.

The sharp decline in prices isn't confined to restaurant menus. It extends to most items the average consumer buys, as evidenced by the prolonged decline in the country's Consumer Price Index.

Asset prices have been hit hard too, destroying household wealth.

Ever since the crisis broke, Greece has mired in an unprecedented austerity, which has led to a vicious cycle of higher taxes coupled with drastic cuts in wages and pensions.

Inevitably, the combination of higher taxes, lower wages and pensions, and lower prices depressed aggregate demand. And that pushed the Greek economy into a depression that parallels the 1930s.

That could explain why Greece's debt to GDP ratio now stands at 180 percent compared to 127 percent back in 2010.

Unfortunately, Greece became the most recent test case of forced deleverage and deflation and what it can do to an economy.

For years, Japan has been another country that has experienced deflation for its own reasons.

What will happen to Japan's deflation problem should the country is forced to deleverage like Greece one day?

It will be an ugly picture – for Japan, for the global economy, and for financial markets, where the 13-euro economy isn’t good for corporate profits.

Number 13 may bring bad luck to equity investors.