Monday, December 12, 2016

Where Did Bail-Out Money Come From And Where Did It Go To?

The European School of Management & Technology (ESMT) is a Berlin-based business school founded and sponsored by large corporations. It published a White Paper on the sources and uses of the bail-out funds for Greece as part of the first and second programs (2010 & 2012). The draft version of the White Paper can be found here. Major points:

* 216 BEUR were distributed as part of 2010/2012 bail-out's.
* 139 BEUR thereof were used for debt service (principal and interest).
* 37 BEUR thereof were used to recapitalize Greek banks.
* 10 BEUR thereof were used as incentives for the 2012 PSI.
* Finally, 10 BEUR thereof, or roughly 5% of the total, were used for the budget.

It should be noted that an IMF calculation differs from the above to the extent that the IMF claims that a total of 247 BEUR were disbursed, of which 41 BEUR (or roughly 17%) were used for the budget and the remainder of 206 BEUR for debt-related items.

* in the first bail-out (2010), Slovakia did not participate and Ireland and Portugal were separate bail-out beneficiaries and thus did not provide funds.
* disbursements under the first bail-out totaled 73 BEUR, of which 53 BEUR came from the EU and 20 BEUR from the IMF.
* 34 BEUR of the first bail-out remained undisbursed.

* in the second bail-out (2012), 154 BEUR were disbursed of which 142 BEUR came from the EU and 12 BEUR from the IMF.
* this 154 BEUR included 11 BEUR disbursed to and later returned by the HFSF, bringing net disbursement to 215 BEUR.


  1. They could mention 1,2,3 programme and in each to write the sums scheduled to be used, how much money used and what left for a next programme.
    For example from 2nd programme 37.3 bil were used for banks recapitalization and left 10.9 bil which Varoufakis returned back. Also the ANFA&SMP around 6 bil never used in 2nd programme because ended from Tsipras& Varoufakis in 30 June 2015.The 10.9 bil become part of 3rd programme.

    In 3rd programme only 5.4 bil € were used in bank recapitalizaion from the 25 bil € (page 15/24).

    Also they could mention the state guarantees, for ELA funding, the recognition of losses from the PSI etc.

    And about the 3rd programme.

    1. If you open the link to the White Paper, you will find answers to your questions except for details on the 3rd program and ELA guarantees.

      I normally enjoy Hugo Dixon but the article you linked was not a good example of his skills. His calculations about debt relief are the same which Paul Kazarian makes. Example: I make you a 1.000 loan for 1 year at 10%, which means after 1 year you have to repay me 1.100. During the year, I reduce the rate from 10% to 5%. Thus, I only receive 1.050 at the end of the year from you. Put differently, I have granted you debt relief of 50. Not false, but besides the point.


  2. The money came from nothing and means nothing. The money sent to Greece has not cost the European taxpayer not a single penny. It only costs something if Greece defaults.

  3. When the Greek debt crisis broke in 2010, Athens turned to the EU for help, and assistance to Greece to date has been contingent on Athens executing domestically unpopular reforms. Nearly seven years, 13 austerity packages and three bailouts later (worth a running total of $366 billion), the Greek economy is still struggling. The debt burden now registers at about 177 percent of GDP, and non-performing loans total $119 billion, accounting for 45 percent of the country’s loans. Unemployment is still around 23 percent, and among the unemployed about three-fourths have been unemployed for at least a year. The Greek government regularly finds itself in a catch-22. Either the government carries out European Central Bank (ECB) reforms – thereby becoming public enemy No. 1 – or it attempts to keep the economy running without full backing from the EU. The very institution Athens initially looked to for help is now seen as dubious and problematic.

  4. The IMF did not commit to the 2015 bailout but has been closely accompanying the program. The fund said it would participate in the program if this proved to be the final bailout, if Greece’s debt was deemed sustainable in the long term, and if Greece received debt-relief measures. The IMF argues the 3.5 percent target set by the EU is not sustainable in the medium term and either the target should be lowered or Greece would need more austerity measures. It has also called for a fixed interest rate average of 1.5 percent for eurozone loans to Greece for the next 30 to 40 years. Additionally, the fund suggested the EU free Greece from all payments on bailout loans until 2040.
    The main obstacle to the EU-Greece talks and IMF participation is Germany. German Finance Minister Wolfgang Schäuble has stated that reforms are a hard prerequisite for any EU funds, and he is staunchly against debt relief for Greece. As the largest economy in the eurozone, Germany provides a major source of revenue to ECB funds. Given the combination of slowing demand for global trade, high economic dependence on exports and an influx of refugees, Germany cannot afford to continue funneling money into the EU to bail out other countries. Such spending also would not sit well with the public as Germany enters an election year. At the same time, Berlin cannot allow a eurozone economy to completely collapse or leave the monetary union. German exports depend on easy access to European markets, and the departure of a country from the eurozone could jeopardize the integrity of the entire common market.
    And so the epic tug-of-war between Greece and the EU (led by Germany) continues as distrust of the EU mounts in Greece. Last May, Greece passed austerity measures worth 5.4 billion euros ($5.7 billion) that greatly impacted taxes, health services, public utilities and pension funds. The government has stated that no more reforms will be accepted. Meanwhile, Germany flexed its EU muscles on Dec. 8 and convinced the union to propose that EU countries in March 2017 should start sending migrants back to Greece as part of a larger effort to prevent asylum-seekers from moving north. Such a move would exacerbate the political, social and economic pressures already facing the Greek government.

  5. Just one more to your big figures. Between 2001 and 2015 the Greek state subsidized their pension funds with 320 billion EUR.

    1. You must be mistaken with that figure. Off the top of my head, the Greek budget is about 70 BEUR annually. That would mean the entire budget going to the pension funds.

  6. OK Klaus, I give up!

    What's the answer

  7. The figure is quoted from Giorgos Papakonstantinou ex. FinMin where he compare it with the present debt (323 BEUR, 2015), without any supporting numbers. A bit of mental math make it rather credible. In the 15 year period average GDP was 200 BEUR i.e., 21,3 BEUR per year or 10,7% of GDP.
    IMF calculate that in spite of the pension cuts Greece still subsidize the pensions with 11% of GDP (2015). They are sitting on a time bomb with short fuse. A person with more knowledge of the demographic composition of the population can likely show the horror scenario.

    1. Sorry, I made a mistake. I thought it was 2010-15 but now I see that it was 2001-15.