Here’s an update as to what is happening with Greece. First, some numbers from the 2011 Greek budget:
- Total revenue: €128 billion
- Real revenues from taxes etc. €55 billion
- Aid from the EU €3 billion
- Borrowing from the market, including rollover €70 billion
- Total expenses: €128 billion
- Real expenses such as pensions, health etc. €63 billion
- Debt rollover and interest payments €65 billion
And another pair of interesting numbers
- Interest rate charged by the market for German bonds, 2 year maturity: 2%
- And for Greek bonds: Around 25%, rising
So, what does all this mean?
Real deficit
In summary the Greek state is like a business that takes in €55 bn in sales but pays €63 bn in salaries and what have you, so it makes a real loss of €8 bn, or 14%. To recover, the state needs to increase revenue by extracting more taxes or running profitable businesses, or it must cut the amount that it pays to the Greek people, or some combination thereof. If it doesn’t the Greek state will run bankrupt anyway, abruptly cut expenses to €55 bn, and go on living in a hand-to-mouth way.
