Friday, November 11, 2011

The magic of Greece's foreign debt

According to the Bank of Greece, the foreign debt of Greece was 413 billion EUR at YE 2009 and 399 billion EUR at June 30, 2011, that is 18 months later. During this time, EU/ECB disbursed around 150 billion EUR in new loans to Greece. Normally, your debt goes up when you take on new loans. Here it went down by 14 billion EUR!

Everyone knows that much of the new debt which Greece took on served to pay off maturing debt. But these numbers would suggest that Greece used every Eurocent of the new debt to pay off maturing debt (and even more).

With all of that, I don’t understand who financed the budget deficit and the current account deficit during this time (domestic savings could not have because they declined significantly during this period).

Has anyone got explanations for me?

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