A Stab at Greek Clarity, Pt. 2

by Charles Forelle

Wall Street Journal
July 22, 2011

Our post from this morning tried to clarify the swamp of murky numbers that came flooding in with the Greek bailout plan last night. With the benefit of an additional briefing, the water is becoming a bit more limpid.

Refer to the earlier post for a more thorough discussion, but here are a number of key points in handy Q & A format.

How much is the euro-zone and IMF lending to Greece?

The new funding is €109 billion. There is already a €110 billion bailout package from last year, of which €45 billion has not yet been lent. That money will also be doled out.

What will Greece use the new money for?

To finance its deficit. The European Commission expects (see PDF page 53) Greece to accumulate deficits of €38.3 billion from mid-2011 to mid-2014.

To recapitalize its banks. That’s expected to cost €20 billion.

To buy back its own debt on the market. €20 billion. (See below.)

To buy collateral it can use in the bond exchange. (See below.) €35 billion.

To repay some maturing bonds. Greece has €86 billion in bonds maturing between mid-2011 and mid-2014. The private-sector “contribution” is expected to mean that €54 billion of those bonds will be swapped for new bonds with longer maturities–that is, that don’t have to be immediately paid back. That leaves €32 billion in bonds that will have to be repaid during the bailout period of mid-2011 to mid-2014.

Astute readers will note that those items total €145 billion. The authorities estimate that Greece will garner €28 billion from privatization proceeds, which knocks the amount it needs down to €117 billion. The commission also says there’s another €38 billion in “other” needs, such as building a cash buffer and settling long overdue hospital bills. Total, €155 billion. Which is just about the sum of the new €109 billion and the €45 billion remaining on the old bailout. Phew!

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