Home > Greece > Greek debt crisis—by the numbers – 7 charts *****

Greek debt crisis—by the numbers – 7 charts *****

from David Ruccio

It all started with a simple question about the Greek debt crisis: “who owes how much to whom?”

Well, as it turns out, it may be a simple question, but there’s no simple answer—at least not an answer that’s easy to formulate based on all the simple-minded reporting and background essays available in the media and from various economists.

Most of what I’ve been reading refers to “Greek debt” owed to the rest of the “Europe.” But, with a background in Latin America, I know that for the most part (unless and until the debt is officially restructured) countries don’t borrow from other countries and countries don’t owe debt to other countries.

-1x-1-1x-1-1

source

It’s true that, right now, Greece (aka the Greek government) owes the rest of Europe (aka various European governments) the bulk of the outstanding debt. But that’s because, as a result of the programs adopted in 2010 and 2011, Draconian austerity measures were imposed on Greek workers in order to bailout European private banks. Thus, the level of exposure of private European (especially French and German) banks declined dramatically, leaving European governments (especially Germany, France, Italy, and Spain) and international lenders (such as the European Central Bank, the International Monetary Fund, and the European Financial Stability Facility) holding most of the outstanding Greek debt.

Here’s what the current mix of creditors looks like, in two different ways:

_83943903_who_owns_greeces_deb_v2_624

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_81184494_5b4fdd7f-b83a-4b52-9dcf-0d3fc917d9cc

source

As it turns out, determining the changing pattern of Greece’s creditors is the easier part of the answer. Figuring out the debtors has been much more difficult.

Landesmannfig4

Did “Greece” borrow all that money? From what I have been able to determine, Greek debt leading up to the crash of 2008 was a combination of private and public debt. According to Michael A. Landesmann, and Vladimir Gligorov, private debt growth (mostly from foreign private lenders) was the main driving force in Greece after the introduction of the euro—although foreign private banks also played a large role in financing government deficits (which grew, in Greece as elsewhere, following the crisis of 2008—although more dramatically in Greece, in relation to GDP, once austerity measures were implemented and economic growth actually declined).

greece-government-debt-to-gdp

The upshot? Basically, Greek private and public debt (prior to the crash of 2008) owed to private creditors has been converted into public debt owed to public creditors.

Here’s what the timeline and total debt structure look like today:

Greek debt

source

Clearly, both European private banks have managed to reduce their exposure to Greek debtors (and wealthy Greek debtors to their foreign creditors) but only at the cost of having European governments and public lending agencies assume responsibility for the outstanding debt and having the Greek government take on a growing amount of debt that, without a significant write-down, simply can’t be repaid.

It’s obvious that Greece needs to restructure its own economy (including government finances and the banking sector) in order to get out of the current crisis. But the hardline adopted by its creditors, which is designed to send a stark message to other debtor nations in Europe, threatens to overturn the very government that can engage in that fundamental economic restructuring.

And that seems to be the goal of the European elite, inside and outside Greece—to prevent the success of a plan that represents a real alternative to continued austerity

  1. Dimitris P.
    July 3, 2015 at 2:23 pm

    “Greek Debt Crisis”. Very concise definition, but wrong. It doesn’t describe the problem. Wrong frame (Kahneman) , useless conclusions. The Greek crisis as it appeared in 2009/10 was one of Fiscal Sustainability coupled with an unsustainable Current Account Deficit.
    There was no way the Greek government could maintain their spending even if the total debt was wiped out.

    • July 3, 2015 at 7:55 pm

      That one has a problem doesn’t make it a crisis. Ruccio’s conclusion addresses the problem: “It’s obvious that Greece needs to restructure its own economy”. What is making it a crisis is its so-called creditors (unaccountable unearned-income-seeking private foreign institutions who after all have only lent it credit limits for its IOU’s) trying to stop the elected Greek government doing just that.

      IMHO, nations need to use an internal currency to resource everyone for the job of looking after themselves: from what everyone needs, the nation already has and is organised to reproduce. Internationally, individuals, business projects and ministries need to be held responsible for their own balances of payment, using honest IOU’s created (credit-card fashion: interest but not late-repayment-penalty free) by expenditure as needed, but written off by people simply earning their keep and organisations doing what they have been resourced to do. Greece, I gather, also needs to eliminate the unnecessary costs of weapon systems it should never have been sold; those who made them have already had and earned their livings.

      Incidentally, this really is “in my humble opinion”. I wouldn’t keep trying to improve the presentation of my argument if reaction had given me reason to believe it was being read and understood. The priority just now surely has to be the Greek political crisis, but I’d much rather be spending time responding to Ann Mayhew’s pedagogical article in RWER 53 and Ib Ravn’s in RWER 71. How a credit-card system works is not so different from the bankers’ clearing house described by Ib Ravn.

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