More Euro Bailouts? Who? How Much?

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 |  Includes: ERO, EU, EWI, EWP, FXE, IEV, VGK
by: Elliott R. Morss

There have been two bailouts so far: Greece ($145 billion) and Ireland ($110.5 billion). Who will be next? To answer this question, I return to parts of a table posted earlier.

Table 1. – Financial Needs of Selected Countries, 2010-2011(Percent GDP)
2010
2011
Total
Total
Maturing
Budget
Financing
Maturing
Budget
Financing
Country
Debt
Deficit
Need
Debt
Deficit
Need
EUR Countries
Italy
20.3
5.1
25.4
18.2
4.3
22.5
Belgium
17.8
4.8
22.6
18.4
5.1
23.5
France
14.3
8.0
22.3
16.0
6.0
22.0
Spain
10.8
9.3
20.1
11.0
6.9
17.9
Portugal
11.6
7.3
18.9
15.5
5.2
20.7
Ireland
6.5
11.9
18.4
6.1
11.8
17.9
Greece
10.3
7.9
18.2
16.5
7.3
23.8
Germany
8.5
4.5
13.0
9.1
0.7
9.8
Finland
9.1
3.4
12.5
9.3
1.8
11.1
Countries with Own Central Bank
Japan
43.4
9.6
53.0
48.9
8.9
57.8
US
15.4
11.1
26.5
18.1
9.7
27.8
UK
5.3
10.2
15.5
7.5
8.1
15.6
Click to enlarge
Source: IMF Fiscal Monitor
Note that I include in this table maturing debt as well as the budget deficit. Countries have to roll over maturing debt as well as financing the current government deficit. And if bond markets are not enthusiastic, interest rates shoot up (unless you have your own central bank to buy up government debt). So according to this table, who looks vulnerable? How about all the countries with a larger financing need than Ireland and Greece? That would be Italy, Belgium, France, Spain and Portugal.
Let’s look at something else. What would be needed to bail out these five countries? Ireland got US$110.5 billion (49% of GDP) and Greece got US$145billion (44% of GDP). Of course, every country case is special and will require different amounts. But in Table 2, I assume the countries above Greece and Ireland in Table 1 end up needing a bailout equal to 40% of GDP.
Table 2. – Projected
Bailouts at 40% GDP
Country
Bailout
Unemployment (%)
Italy
844
8.7
Belgium
187
9.3
France
1,060
9.9
Spain
584
18.7
Portugal
91
11.0
Ireland*
111
13.5
Greece*
145
12.0
Total
3,022
Click to enlarge
* Actual
Estimates of how much is actually available in the EU/IMF Stabilization Fund range from US$750 billion to US$1 trillion. With Ireland and Greece already claiming US$256 billion.
Without France and Italy needing assistance (why not?), $1.1 trillion would be needed for future bailouts at 40% GDP.
And look at those unemployment rates. They will undoubtedly go up because of belt-tightening required by any bailout package.
What a mess! Reason for concern.

Disclosure: No positions