Friday, 10 February 2012

Greek budget numbers

In a comment on my previous post about Greece, Frances Coppola helpfully directs my attention to this spreadsheet put together by Yiannis Mouzakis, using data from monthly reports by the Greek finance ministry.  (The reports give year-to-date data, so the spreadsheet backs out each month's figures by subtraction: it's possible that some months' results are affected by restatements of previous months.)  I've created a similar spreadsheet myself: the primary* balance for January-June is a deficit of €5.7bn, for July-December a surplus of €360mn.  The corresponding numbers in Stephanie Flanders' article  are €5.1bn and €1.4bn.

It's possible that Flanders' numbers include two receipts not part of the main budget figures, listed as "Revenue from financial transactions".  The amounts are €952mn in July and €380mn in December.  I suppose this is income from the sale of assets, such as the sale in June of a 10% stake in OTE Telecom.  Adding these sums in gives a July-December primary surplus of €1.7bn.

This looks like good news for Greece.  However, also not included in the figures are some significant outgoings, including €1.38bn in December for "Acquisition of credit institution's preferred shares"  and a further €306mn in the same month for "participation in the share capital increase of various enterprises".  The total of additional outgoings over the six months is €2.6bn. The purchase of preferred shares is the final stage of a bank bailout scheme set up in 2008, and compensates Greek banks for their write-downs on government debts.

So the summary is that the Greek government did run a primary surplus for the last six months of 2011, if you count all its income and only some of its expenditure.

Does this put Greece in a position where default becomes a relatively attractive option?  No, in that it would create a run on the Greek banks at the same time as inflicting further write-downs on them.  Yes, in that the cuts being demanded of it now seem to be aiming for a substantial primary surplus.  It's hard to see why any Greek politician wanting to be re-elected in April would back the Eurozone's demands - even if they think it the right thing to do they'll be waiting hopefully for someone else to say so.

*"primary" in this context means "not including debt interest payments".  If you have a primary surplus you can consider defaulting, since you don't need new borrowing to keep going.

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