We often say that “Greece got a bailout.” But is that really accurate? If you think you understand the Greek bailout, I would suggest you take a close look at the numbers below. What I have tried to do is look at Greece’s finances for 2010 and 2011 to answer three questions: how much money did Greece need in 2010 and 2011? For what purpose? And who provided that money? The answers are really interesting.
The analysis is based almost exclusively on published reports by the International Monetary Fund. Since the numbers do not quite add up (in the IMF’s own documents!), I have made some minor adjustments and I have also, in one case, made an estimate (the split between interest paid to foreign investors versus Greek investors). Where possible, I have consulted third-party sources such as the Bank of International Settlements. I believe the margin of error in the calculations is pretty small.
First, let’s examine Greece’s financing needs. Broadly speaking, a government has four cash needs: (1) to finance expenditures (wages, pensions, services, etc); (2) to pay interest to holders of debt; (3) to repay investors whose debt is maturing; and (4) to finance one-off needs, which for Greece, the IMF defined as including “bank assistance and stock-flow adjustments.”
Overall, Greece needed about €114 bn in 2010 and 2011. Of that, however, only €53 bn stayed in Greece to finance government spending, provide assistance to banks, pay interest to Greek creditors or repay maturing bonds held by Greeks. More than half of Greece’s cash needs, or €61 bn, went to either pay interest to foreign creditors or repay maturing debt held by foreigners.
Now let’s look at where this money came from. Around €41 bn came from private investors, of which 80% were Greek. The rest of the money, €73 bn, came from the bailout provided by the official sector. Germany, France and Italy supplied €36.6 bn, the rest of the Eurozone members provided €16.5 bn, and the IMF provided €19.9 bn.
Looking at the numbers this way, the EU and the IMF gave Greece €73 bn, of which €61 bn went to pay foreign investors who held Greek debt (via interest payments or via receiving cash when their bonds matured). If you mentally split the world between Greece and the rest, then Greece needed €53 bn “for itself” to pay the bills, pay interest to its own investors and honor the debt held by its own people.
The Greek government was able to raise €41 bn of that €53 bn from private investors in the market (in fairness, this was partly aided by the European Central Bank making cheap credit available to Greek banks). But in a very narrow way, the cash provided by foreign governments and the IMF to support Greeks per se was roughly €12 bn – the rest went to foreigners. Even if you assume that all market financing was made possible by ECB-funding, more than half the assistance was still geared to foreign investors.
I have no intention to draw any grand conclusions from this analysis. But it is important to precise when we talk about matters that have acquired an extraordinary political and emotional significance. And instead of merely saying “Greece gets a bailout” we can be more accurate about who is providing how much money and for what purpose. This crisis requires nothing less of us.