Greek officials together with IMF and EU ones are touring Europe investors to convince them to buy Greek long dated bonds: I remain unconvinced about the chance of success due to a continued depressed economic environment and the time frame required to modernize the Greek economy that goes well beyond the 3 years rescue plan.

1. http://marketsandbeyond.blogspot.com/
http://www.pcgwm.com/
Greece - January-August budget analysis
This week the Greek Government is undertaking a roashow through Europe's financial
centers to explain how great the implementation of austerity measures is going in order to
convince investors that they shouldn't have to pay ruinous interest rates on their sovereign
debt (11.6% on Friday on the 10 years bonds, over 5 times what Germany pays).
Markets & Beyond spent hours going through the details of the Greek budget
since January 2010 and looking at 2009 data as well. The conclusion is
simple: whilst the budget deficit is being reduced the crisis is not over and far
from it.
A simple view of the progress between revenue sand expenses shows that during the
January-August 2010 period (representing 67% of the whole year):
• Revenues received by the State represent 59% of what was budgeted in the
revised numbers presented by the Greek Government in June, i.e. behind
schedule (they should be at 67%). The Greeks are saying that the new measures
are being implemented and additional revenues will come in to match the
Economic Policy Program. I doubt it due to a continued contraction of GDP(-4%
expected in 2010) and rising unemployment (11.6% at the end of June).
• In the meantime, expenditures reached 64% of budget forecast more or
less where it should be at this time of the year; interest payments are
however well ahead at 84% which is due to increasing short term financing (the
only way Greece can raise fund in the markets) and increasing risk premium asked
by investors combined to the 5% interest payment on the rescue package extended
to the country on longer term refinancing.
• The Public Investment Program (P.I.B.) deficit is also behind schedule at
56%. I guess this is used as an adjustment variable to plug (at least partially) any
large divergence from the budget by postponing investments to next year.
My view is that the budgetary situation for Greece will be deteriorating until
the end of the year mainly due to a shortfall in revenues direct corollary to the negative
economic situation.
Even if one believes Greek’s budgetary projections, the debt will increase in the turn of
minimum EUR 21 billion and the Debt/GDP will reach 130% (115% in 2009).
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2. http://marketsandbeyond.blogspot.com/
http://www.pcgwm.com/
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3. http://marketsandbeyond.blogspot.com/
http://www.pcgwm.com/
I do not know when the day of reckoning will occur: in 2011, Greece could probably
continue financing its requirements via short term TBills and the rescue package for
longer term funding; in 2012, Greece has to repay EUR 42.8 billion (including 11.1 billion
in interests) on its bonds and EUR 36.7 billion in 2013. In 2014 and 2015, Greece will need
to repay the IMF and the EU approximately EUR 70 billion per year. How long markets
will wait? When German patience will run out?
The EU shares the Greek concerns because a big chunk of the country's debt is held by the
region's banks (mainly French and German in the turn of EUR 111 billion according to
March BIS numbers).
Greece needs time to reform its economy and witness this bearing fruits: we are not
talking about 3 years (the initial length of the EUR 110 billion rescue plan) but at least 10
years. A debt restructuring is the only way to avoid a bankruptcy, whatever
euro-dogmatics are saying, and the sooner the better.
Oh! And I forgot the +/- EUR 600 billion of pension liabilities the Greek state is the happy
owner which represents 875% of GDP…
Last final word: a MUST-READ article written by Michael Lewis in Vanity Fair about
breathtaking corruption, startling failure of societal norms, an absolute collapse of ethics
on a national scale.
Source:
BIS: The international banking market - statistical annex
http://www.bis.org/publ/qtrpdf/r_qa1009.pdf
Vanity Fair: Beware of Greeks Bearing Bonds -Michael Lewis
http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-
201010?currentPage=all
Hellenic Republic - Ministry of Finance: Stability and Growth Program
http://www.minfin.gr/portal/en/resource/contentObject/contentTypes/genericContentR
esourceObject,fileResourceObject,arrayOfFileResourceTypeObject/topicNames/stabilityG
rowthProgram/resourceRepresentationTemplate/contentObjectListAlternativeTemplate
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