The Eurozone and Greece | The Big Picture

Barry Ritholtz has a rundown:

Fact set 1: Greece is an economy about the size of Connecticut and has been restating its economic statistics since it became the 12th member of the Eurozone. It is widely known for its profligate government spending patterns, indulgence of public-sector labor unions, corruption and tax evasion, an underground economy, a debt-default history … and its present difficulties. Markets and financial agents are highly skeptical about its promises to impose austerity, correct budget imbalances, and comply with Eurozone requirements. Runs have occurred on Greek banks. 75% of Greek government debt (bonds and bills) is held by non-Greek creditors, mostly European banks in countries like France and Germany. Greece is rated BB+ by S&P and its debt trades like a junk bond credit. It faces repeated public-sector-led strikes and protests, even though its parliament has enacted budget austerity measures. An immediate 110-billion-euro Greek bailout package is in place.

Fact set 2: Portugal is an economy about the size of Kentucky, and is considered to be the next weakest credit in the Eurozone. It is rated A- by S&P. It has announced a credible budget austerity plan that is projected to cut the deficit from 9.4% of GDP in 2009 to 7.3% in 2010 and to 4.6% in 2011. According to a Barclays Capital summary, steps to be taken include: a “5% pay cut for state-company managers, a 5% pay cut for political officeholders, a 1 to 1.5 point rise in personal income taxes, a 2.5 point rise in corporate tax, and a 1 pp increase in the VAT rate (to 21%).” The majority government and its opposition have agreed on the need for emergency action. It appears that the public-sector labor unions in Portugal support the austerity measures and understand their importance. 72% of Portugal’s debt is held by foreign creditors.

Fact set 3: Other countries in the Eurozone are rated as follows by S&P: Italy A+, Ireland and Spain AA, Belgium AA+, Netherlands, France, Germany, Austria, Finland AAA. Ratings notwithstanding, Ireland, Italy, and Spain are routinely identified as the other troubled Eurozone members.

Fact set 4: For the years 2010-2013 the gross government financing requirements of the following four countries are: Greece 158 billion euros, Portugal 70 billion, Ireland 69 billion, Spain 448 billion. Total gross financing needs are 745 billion euros. Note that the total announced European Stabilization Fund (ESF) package from the IMF, Eurozone, and EU authorities happens to be 750 billion. We will skip the composition of that 750 billion, since it has been widely reported in the press and detailed by our colleague Bill Witherell in a previous commentary. See www.cumber.com.

Posted via email from Jim Nichols