Monday, February 20, 2017

Greece: The fun continues & Spain

So of all the billions that were borrowed by Greece over the past 4 years, how much was "new money" and how much was refinancing old existing debt?  Most finance people I spoke to said that they thing that between 15/20% of all funds borrowed by Greece over the past 3 years was "new money" to support the economy.  The population at large believes that its 100%.  What is the real figure?  Well in fact, the number is a little lower; the total new money that Greece raised over the past 3 years is about Euro 300 billion, of which slightly less than Euro 24 billon was "new money" or about 8%.  Although truth be told Greece's debt has shrunk from Euro 360 billion to Euro 300 billion between 2012 and 2017...  The goal for the ECB was to refinance the European banks loan to Greece -- socializing the debt.  The exercise is now largely completed, so the next tranche of money will be harder to obtain -- as Germany keeps on reminding everybody.

The reality is that Greece got the big squeeze by Europe and the IMF.  The pain has been excruciating with unemployment north of 20% -- and this for many years.  Generations of Greeks will have had no job for a decade.  There are implication when things like that happen.  The truth is that the European game was/is rigged.  Germany keeps on producing massive trade surplus -- that means that there are massive trade deficits that have to be financed (it is a zero sum game); Europe's trade is largely self contained.

On other news, the ex-central bankers of Spain are being called in by the courts to answer why the central bank proceeded with the IPO of Bankia (360,000 investors lost everything) when they knew full well that the bank was on the verge of insolvency.  The powerful being called to explain what they did!  A new thing.

Could be intersting!


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