Today for the first time i took a look at Greece’s numbers firsthand. If Wikipedia is to be trusted then the numbers below are very scary.
Public finances Public debt $405.7 billion (125% of GDP)
Revenues $108.7 billion (2009 est.)
Expenses $145.2 billion (2009 est.)
Foreign reserves $3.473 billion (31 December 2008 est.)
Assuming that they can borrow at 3% their debt service annually would be about 12billion. Not so bad eh? Their revenues for 2009 were 108.7billion and their expenses were 145.2 billion. I am assuming the debt service amount is included in the expense line item. That leaves a $37billion deficit. (which is the 12% of GDP that everyones talking about.) That raises the national debt to $442billion. The austerity plan will cut the deficit to 8% of GDP so going forward Greece will have a deficit in the range of $25 billion. By the end of 2010 their debt will be close to 150% of GDP and growing. And their debt service will have grown to $14.5billion. Aside from shaving $12billion because of the austerity plan they will spend another $2billion in debt service.
They definitely wont be growing the economy. To the contrary the austerity program will probably contribute to a contraction and perhaps deflation as it did in Ireland.
And this is all assuming that they will be able to borrow at 3%. For every 1% more they have to pay almost $5billion will come out of the budget for debt service.
I don’t know how this will resolve itself but lending them $6billion to meet immediate payments on their debt will only serve to exacerbate the problem.