Courtesy of Mish.
Payback of Greek Debt
Greece has something like €315 billion of public debt.
Forget about that. Instead focus on liabilities as presented in Revised Greek Default Scenario: Liabilities Shifted to German and French Taxpayers; Bluff of the Day Revisited.
The above total is a “modest” €256 billion to be paid back over time.
- Assume 0% interest
- Assume a Current Account Surplus of 3% of GDP
- Assume Greek Debt-to-GDP is 176%
- Assume Greek Debt €312 billion
- Assume Greek GDP is €178 billion
Point 5 is derived from points 3 and 4. The numbers seem to vary a bit depending on the source, but they should be close enough for this exercise.
Payback Math at 0% Interest
Let’s assume that Greece can run a 3% current account surplus for as long as it takes to pay back €256 billion.
3% of €178 billion is €5.35 billion. To pay back €256 billion it would take about 48 years. That assumes 0% interest and a 3% current account surplus every year for 48 years!
Those calculations ignore rising GDP. But they also ignore a huge burden on Greek citizens for 48 years.
Let’s be honest: Greece is not going to run current account surpluses of 3% per year for perpetuity.
Unrealistic Debt…
