Friday, May 18, 2012
The Recipe for a Greek Salad
This article from a Greek English language newspaper describes the various possible scenarios in the inevitable event that the Greek government runs out of the money needed to pay its bills. There are some interesting numbers in the piece. Of the budgeted 5 billion euros in expenses due in June, 3.6 billion euros comprise the refinancing of T-bills and interest payments. That means only 1.4 billion euros are needed for current expenses. Operating on borrowed funds has been expensive for the Greeks. Four billion is expected to flow in from the International Monetary Fund and the European Financial Stability Facility (EFSF).
The real interesting statement is this: Finally, the government may use part of the resources of the Financial Stability Fund (FSF), which are mainly earmarked for the recapitalization of banks. The fund currently has a reserve of 3 billion euros.
According to statements by FSF members, the fund will disburse 18 billion on Tuesday or Wednesday to boost banks’ capital base. National Bank of Greece will receive 6.9 billion, Eurobank 4.2 billion, Alpha Bank 1.9 billion and Piraeus Bank 5 billion euros.
The Greek government budget has expenses of 5 billion euros and an unknown amount of income. Greek banks are going to receive 18 billion euros for recapitalization. This must mean that the survival of Greek banks is a higher priority than the survival of the government itself. At least, that's the way I see it.
Janet Daley has her own take on the Euro predicament and, as usual, she's got a good grasp of the situation.