Ekathimerini – Relevant Facts & Figures

It would be helpful if the involved parties (EU, ECB, Greece) were more informative about the relevant facts/figures of the present crisis.

The habit has taken place to only talk about “percentage of” figures. Public deficit and public debt as percentages of GNP are interesting figures but they alone do not allow analysis and conclusions.

How have actual government expenses developed so far? My understanding is that they have declined in absolute terms in the last year. Good news! So why is so much attention given to the fact that, so far this year, the budget deficit is off by about 3 billion EUR?

If expenses have declined but the deficit increased, it can only mean that revenues have declined dramatically. In which categories have revenues declined and what can be done about that?

The balance of individual components is a figure which cannot be managed per se. It can only be influenced by understanding the components and by managing those.

Today’s shock announcement by the IMF: public debt may increase to 172% next year! Is that really the relevant figure? The increase in public debt should more or less correlate with the public deficit in absolute terms. If the public deficit comes out at 15-20 billion EUR this year, the government should need 15-20 billion EUR in new debt this year. So why is everybody talking about 3-digit billion figures? (it is because the bulk of the new debt serves to repay existing debt).

The most relevant figure of all is the foreign debt of the entire country. Foreigners fear that they may not get their money back from Greece (be that from the government, from the banks or from whoever). So how much money do foreigners have at stake in Greece?

At December 31, 2009 (1-1/2 years ago) the gross foreign debt of Greece stood at 408 billion EUR. Where did it stand at March 31, 2011 after billions and billions of additional Euro were lent to Greece? Surprise, surprise! It stood at 408 billion EUR!

If billions and billions of Euro entered the country during the above period but the balance remains unchanged, then billions and billions of Euro must have left the country during this period? Would this not be worthy of analysis???

The analysis would say that the money which entered Greece during the above period left Greece for the purposes of debt service, imports and capital flight. And the conclusion would be that if one really wants to stop the financial drain on the country, one has to reduce debt service (reschedule), reduce imports (surcharges) and stop capital flight (controls).

And then the new money which enters Greece would stay there and help rebuild the economy!

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