The Ever-Growing Greek Bailout
Those pesky billions in the second Greek bailout, they keep multiplying! The folks over at the Financial Times Brussels blog have already tried to explain what is really going on with the second Greek bailout’s size, length and the contribution division between the euro-zone countries and the International Monetary Fund. We thought we’d give it a crack too, The Wall Street Journal Real Time Brussels blog reported.
There are three issues we want to address: one, the actual size of the Greek bailout. Hint: It’s not €130 billion but €138.2 billion. Second, the participation of the IMF in this bailout and how it compares to the previous one. Hint: it’s smaller than you thought. And third, the proportion of the bailout earmarked for Greece’ financing needs rather than the debt restructuring or bank recapitalizing. Hint: it’s not large.
The actual size of new bailout for Greece is not €130 billion but €138.2 billion. Now, we know €130 billion was a nice, round number. But it’s just not the whole figure. Here’s why. Greek finance minister Evangelos Venizelos made a reference Tuesday to €8.2 billion in IMF funding for 2015. That got us digging, because it implied that the IMF would continue financing Greece even after all of the €130 billion aid under the 2012-2014 joint program by the European Union and the IMF has been disbursed.
In fact, the IMF’s contribution would be €9.8 billion through 2014 plus another €8.2 billion for 2015. That brings the total up to €138.2 billion between now and 2015. A look at the disbursement schedule in a joint report by Greece’s lenders also confirms that the IMF’s contribution through 2014 will only be €19.8 billion–including €10 billion not paid out from the first bailout–out of the €28 billion the IMF has pledged for Greece.*
The next point is what percentage the IMF is actually contributing here. That affects how much of the bill is getting picked up by the euro zone. The IMF’s pledged €28 billion breaks down to: €10 billion left from the first Greek bailout; €9.8 billion for 2012-2014; and €8.2 billion for 2015.
The IMF’s €9.8 billion participation in the €130 billion package that runs up to 2014 means that the euro zone putting up the remaining €120.2 billion. The IMF’s participation rate in the first bailout was 27.5%. (The fund contributed €20.1 billion—or €19.9 billion if you read page 4 of the report instead of the table on page 5–of the total €73 billion disbursed under that package.) The participation planned for the second bailout has dropped to 7.5%. Was that Finland’s Jyrki Katainen we heard say “ouch”?
The IMF will be the sole known creditor for Greece in 2015. That in and of itself invites questions about whether the euro zone will make a come-back with a third bailout in 2015. Besides, it has repeatedly committed to keep Greece financed “until it returns to the market.”
Greece’s debt sustainability report from its official creditors says it like this: “The high level and share of official debt, as well as the de facto senior status of the bonds resulting from the co-financing structure agreed in the context of the debt restructuring complicate Greece’s return to the markets at the end of the second program. Should market access not be restored at the time of the expiration of the program, additional official sector financing could become necessary.” Read more. (Subscription required.)