Monday, January 16, 2012

Greek Debt

The Greek sovereign debt is in the news today. I got to wondering just how big it is. Meaningful numbers are difficult to find, but I succeeded after a while by consulting the German Spiegel (link). It carries a listing of the debt subdivided into categories—thus the institutions that actually hold it. I show this in a tabulation. Only money actually dispersed, thus actually paid out, to Greece is included. Much more has been promised. My conversion of Euros to dollars uses a rate of $1.2671 per €1, a quite low rate reached this morning.

Greek Debt

 € bill.
$ bill.
%
European States
41
52
18.0
European Central Bank
50
63
21.9
IMF
18
23
7.9
Greek banks
50
63
21.9
Foreign banks
39
49
17.1
Foreign funds
30
38
13.2




Total
228
289
100.0

Much of the fretting in the media circles around the smallest number here, the holdings by foreign funds (13.2% of the total); some of these are hedge funds. The reason for the barely suppressed hysteria is that hedge funds insure their holdings using credit default swaps; such instruments still exist and may still be sold as derivatives, hence the liabilities are spread God-only-knows where. The invisible consequences may materialize, who knows, even in this humble basement where I write, and I may succumb to dark evil things that will suddenly attack from thin air.

To get some feel for these numbers, I looked up the GDP of the European Union; granted, that is greater than the Euro Zone. That number was $16,282 billion in 2010. The Greek debt, therefore, represents 1.8 percent of the gross domestic product of all Europe. In 2010 Greek GDP stood at $305 billion. Germany’s was $3,315 billion—and the Greek debt, expressed as a percent of German GDP, was 8.7 percent.

The debts are high but are they monstrously high? Not at all. The dangers lie in our virtually non-existent powers of collective self-control—and our much vaunted markets that can spread panic in the flash of an eye.

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