European Debt and the EFSF – The Numbers Game
The Süddeutsche Zeitung (SZ) published a really interesting article on Friday arguing that the EFSF’s guarantees were in fact sufficient to last for all of 2012. I took a look at the numbers myself in order to check their math. The EFSF has been endowed with effectively usable guarantees of 440 bn €. Of the bailouts already agreed to, the first Greek package was financed bilaterally and thus does not affect the EFSF. Ireland will receive 67.5 bn € in total with 17.7 bn € coming from the EFSF. Portugal was promised 78 bn € a third of which (26 bn €) will come from the EFSF. Greece meanwhile has been promised a second bailout package of 109 bn €, the IMF will put up some of this money, which I have estimated as to be a third, leaving 73 bn € to be financed via the EFSF. Let’s see what that gives us (note that all figures here are in billion €):
|Bailout promises given to / coming from||total||EFSF||IMF||EFSM||bilateral|
|Greece||110,00 €||30,00 €||80,00 €|
|Ireland||67,50 €||17,70 €||22,50 €||22,50 €||4,80 €|
|Portugal||78,00 €||26,00 €||26,00 €||26,00 €|
|Greece II||109,00 €||72,67 €||36,33 €|
|available funds total||440,00 €||60,00 €|
|remaining non-promised||323,63 €||11,50 €|
The not yet leveraged EFSF thus has 323 bn € in guarantees remaining for countries apart from Greece, Ireland and Portugal. In addition to the Commission’s having an additional 11 bn € in unused funds lying around. What happens when we take into account the most recent leverage option, which assumes a multiplier of 3, then? For this we need to look at how much money the EFSF actually has dispersed already, not on promises it has given for the future.
|Funds actually dispersed||total||EFSF||IMF||EFSM|
|Ireland||29,20 €||6,60 €||8,70 €||13,90 €|
|Portugal||30,40 €||5,90 €||10,40 €||14,10 €|
|remaining funds (minus Greece, Ireland & Portugal contributions)||397,15 €||1.191,46 €|
|+ minus Italy||318,57 €||955,71 €|
|+ minus Spain||266,35 €||799,05 €|
|+ minus Belgium||251,10 €||753,29 €|
|+ minus remaining promises to GR, IR & P||147,23 €||441,69|
We also need to deduct those countries bowing out of its EFSF obligations because they are in receivership of aid coming from this company [sic!]. That still leaves us with almost 400 bn leveragable Euros, 1.2 trillion € if we assume a multiplier of 3 may be relied on. Now if we continue to play this (mind-)game and see how much money would be available if Italy, Spain and Belgium drop out, taking into account promises already given to Greece, Portugal and Ireland, we have only 147 bn € remaining, which gives us a leveraged 441 bn €. Let’s look at what kind of sums relevant countries (Italy, Spain & Belgium effectively as everybody else is either too small (Cyprus), already in receivership (Greece, Ireland & Portugal) or not (yet?) truly threatened (France)) are looking to refinance in the mid- to near-future.
|Debt maturity||> 1 Yr|
In a worst case scenario of Italy, Spain and Belgium needing EFSF financing for their debt then, the EFSF even leveraged would not be sufficient for the Eurozone to even last 2012. The SZ needs to redo its math on this. Interestingly enough though, a leveraged EFSF would be capable of re-financing all of Italy’s governmental debt for 2012. Note that this overview does not take into account neither the ECB, further bilateral loans, the ESM, nor the remaining – admittedly limited – EFSM funds.