Chillin' out till it needs to be funded
Well finally the calculation of excess interest due from the EU family’s brat posted by a lasagna banker division. German bankers keelhauled after calculations of the imagined 20% in budget cuts and $46bn in loans turned out to be a bad prescription for the wunderkind that joined the Euro to improve its fortunes and reported everyone else’s grades and numbers. When Greece finally reported a 14% budget deficit for the year and a lot of debt to come after the first tranch of debt of $46b come May 19, interest payments in the next five years itself were estimated at $100b and it was pointed out here and at ftalphaville that the resulting contraction in the economy would indeed be a bad prescription. Even now Greece has agreed to increase VAT to 23%
That’s a Euro 100b for the cradle of civilization as it gives in to become a Roman protectorate, hopefully well fed enough with this largesse to start cutting the flab and stay healthy. Public sector jobs apart, budget measures total 13% of the $350b GDP or $50bn for big brother’s EUR 80bn ( covers French debt completely and some German, why not just extinguish old debt!) Germany will pay 28% in the package. Will this actually save the situation in Spain($800b) and Portugal ($268b), remains to be seen..
IMF will pay the additional $30bn EUR from its pocket. Out of Germany’s 22bn, 8.4 b EUR is to be paid out in the first year itself. The speculation gains ground that Greece will be looking for an exit from the EU as well. Fiscal profligacy cannot be an isolated phenomena in greece though and after Spain and Portugal saga are under control, ECB will have to start taking caree of British, German and French national debt as well, with UK going into a coalition led tailspin/bankruptcy administration post elections