During all of the coverage of the macro consequences of a Greek exit, we sometimes lose sight of how serious the financial problems in the country really are.
A great post at The Prodigal Greek (h/t @economistmeg) takes a look at the budget execution report for January through April. It goes beyond the headline number – that the budget deficit fell well below the target of €3.3 billion at €1.7 billion – and takes a deep look at what Greece is dealing with.
A few highlights from the post:
- Overall revenues are €495 short of target, even after tax increases
- A €418 million shortfall in VAT revenues points to a profoundly depressed economy
- Only four months into the year, Greece’s social security funds have used 47.5 per cent of their annual grant.
In particular, we found the fact that the entire budget for January to April grew by around €3.1 billion particularly troubling. During that time, interest payments increased by €3.5 billion. Revenues fell and spending declined or stayed flat nearly everywhere, meaning just about everything went to creditors.
The next Greek government will inherit a depressed economy, plummeting revenues, unaffordable social security programs, and ever increasing interest payments. But because scaling back government spending is a huge part of the austerity program that will make Greece competitive in the look run, it’s clear there is no solution that doesn’t involve a great deal of pain.
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