Economists Don’t Know What “Free Lunch” Means

Karl Whelan is probably the world’s foremost expert on the workings of the European Central Bank who’s not employed there. His insights into what the ECB is up to and why are invaluable. I don’t usually agree with his views, but that doesn’t bother me.

Until he wrote this. Whelan is the latest example of a leading economist who evidently doesn’t know what people mean when they say “there is no free lunch.” You’d think that every economist would know exactly. And yet.

Whelan stands in prestigious company, alongside none other than Larry Summers and Brad De Long, who argued in 2012 for the existence of a “fiscal free lunch.” They were preceded in 2009 by the American and Swedish central bank researchers Christopher Erceg and Jesper Linde. The purported free lunch all of them were referring to was the benefit of fiscal stimulus at the zero lower bound.

Whelan staked his free-lunch claim while arguing with Hans-Werner Sinn, a stubbornly-as-a-mule nationalist German economist who seems to delight in demonstrating to proponents of European integration every last possible way the project could go wrong. And there are indeed a lot of those ways. Sinn’s latest is that the ECB plan to have Euro national central banks buy their governments’ bonds as monetary stimulus, so-called Euro QE, will put Euro governments at risk of some member defaulting on its bonds.

Whelan dismisses that point by arguing that QE is “close enough to a free lunch” to justify the risks. He makes a fairly cursory argument for QE’s benefits, but his gist is clear: with inflation as low and economic slack as high as they are, the benefits to stimulus are high and costs negligible. Which you can agree with or not – that’s not my point.

Summers and De Long and Erceg and Linde made more detailed arguments why fiscal stimulus at the zero bound is good policy with little or no costs. Which you can agree with or not – that’s not my point either.

My point is, there’s a very basic misunderstanding here of what the aphorism “there’s no free lunch” means. It doesn’t mean that there’s no such thing as good public policy.

Take universal public education, or any other public policy you like. Since you like it, you evidently think the benefits of that policy outweigh the costs. You might even think there are no costs to this policy at all, because it pays for itself. And you very well may be right. And that’s not a free lunch.

The point of the phrase “there’s no free lunch” is to remind people to always look at both sides of any policy. “There’s no free lunch” is a close relative of Newton’s third law, which says that for every action there’s an equal and opposite reaction. If somebody’s going to eat a lunch, somebody’s got to commit resources to make a lunch. Such laws of physics always hold true.

For an example, let’s model an absolutely ideal stimulus scenario. The government pays ten unemployed people owning ten unutilized plots of land to grow ten crops, and then sells the crops back to the ten in equal proportions for the same total amount paid. To make it even simpler, these ten people want no other products besides those ten crops, and those crops require no inputs they don’t have in unlimited supply.

In this model, the government pays only a small amount to the staff who plan and organize the program, and ten people who otherwise would have gone begging feed each other. Would that not be brilliant public policy? Sure it would be, though you know I’m not saying life’s that simple. Does anybody get a free lunch? No. Those ten people all work for their lunches.

All I’ve done is craft a model of government solving an organizational problem. My model takes for granted that the government’s ability to issue money makes it able to solve the problem where people on their own can’t. I haven’t presented any theory that purports to explain why that would be so. Nor have I tackled the tough question of whether those ten might have done something more productive for each other if government had left them alone.

That’s what the Keynesian theory in the Summers-De Long and Erceg-Linde papers is all about. It’s an argument that the government has a unique ability to solve organizational problems among unemployed people and owners of underutilized capital, which otherwise wouldn’t be solved soon enough to justify letting it be. Believe it or don’t. It’s not a free lunch.

What Whelan really means by saying QE is “close enough to a free lunch” is that he thinks its costs are minimal and its potential benefits large. As with the writers on fiscal stimulus, the benefits he assigns to QE are all about solving organizational problems.

But any policy that has an effect must have a cost. Even if the effect pays the cost, or the cost is just worth paying, the cost is always there. The only way Euro QE can have no cost is if Euro QE does nothing. Resources can’t be added in one place without being produced by work or subtracted from stocks somewhere else. There really is no free lunch.

So please: if what you mean is that something is good policy, say it’s good policy. Good policy is good policy. Free lunch is magic. Where do we go next from that, stories about legendary economists multiplying fish?

Personally I think Whelan’s enthusiasm for QE could only make sense if he’s hoping it will facilitate fiscal stimulus. I’m not an advocate of QE combined with fiscal expansion, also known as helicopter money. I think it’s potentially a hugely powerful and hugely risky combination. But I can also see that if it were managed very carefully it just might work like nothing else any advanced economy has tried since 2009, and I’m curious to see what would happen if some country did it. Preferably some smallish distant one.

But so far, the Euro Area has no plan for anything more than standalone QE, without fiscal expansion. And I think we have enough experience with standalone QE to know it doesn’t stimulate spending. All it does is devalue currency relative to assets, transferring resources from shorts to longs and from importers to exporters.

So I don’t see Whelan giving any real answer to Sinn. Sinn is looking at the euro currency union from a nationalist perspective, and seeing all sorts of risks his national government has taken on. You can disagree with his nation obsession, or be bored by his cataloguing of the various angles from which one can look at the same intra-Eurosystem risks. But there’s no denying the risks are real.

An international currency union with assets distributed across its members’ NCBs is inherently vulnerable to the risk of a member quitting and taking assets with it. Euro QE will balloon NCB balance sheets. That will balloon the potential losses from a euro exit.

On the other hand I can think of my own answer to Sinn. The euro devaluation is a big transfer of resources from the rest of Europe to Germany, as it’s by far the biggest exporter. NCB balance sheets probably won’t grow much bigger than they were in 2012, and since Greece probably won’t be allowed to play the Euro QE game, the extra risks of near-term euro exit are small.

Which might explain why the supposed hard-money hawks of the German establishment don’t seem so opposed to QE after all.

Tsipras Caves

And so Greece and the rest of Europe are moving towards a deal to keep Greece out of default and Greek banks from running out of cash. The new Greek prime minister, Alexis Tsipras, appears to be climbing down from his promises to stop letting foreign creditors dictate Greek economic policy.

What’s not clear yet is just how far Tsipras is willing to climb down, and how much other European governments will demand of him. Although this is a strong signal that the two sides will make a short-term deal, it’s only a tentative agreement. Before an actual deal can be struck to continue rolling over Greece’s maturing debts and holding open the central bank credit lines to Greek banks that keep them liquid in euros, Greece’s troika of official creditors must still review and approve a preliminary fiscal plan that Tsipras is supposed to produce before midnight on Monday.

To continue receiving support in May and June, the Greek government must win approval of a more detailed fiscal plan, and to continue getting aid after that, the Greek government must agree a new adjustment program.

The component of the tentative deal that has received the most attention is that European governments will back off from their previous expectation that Greece would run a 3% of GDP primary surplus this year. A statement issued by the Eurogroup after its meeting on Friday said creditors will adjust the target to “take the economic circumstances into account.”

But Greece has been allowed to miss fiscal targets due to worse-than-forecast economic performance every year since 2010, and this year would have been no exception even if the previous government of Antonis Samaras had stayed in power. The target was premised on forecasts of 2.9% real GDP growth and 3.3% nominal GDP growth, which were very optimistic even before the recent collapse of Greece’s package-tour sales to Russia.

As I’ve written, the real test for Greece is whether it can get its fiscal balance back to where it was in January-November of last year, before tax collections plummeted during the election campaign. This tentative deal gives the new Greek government some breathing room, but it sets up a tight schedule for Tsipras to put forward acceptable fiscal plans.

Predicting what Tsipras will do is difficult because he is telling one thing to European leaders and another thing to Greek audiences. In a televised appearance on Friday, he said Greece “took a decisive step, leaving austerity, the bailouts and the troika,” but “won a battle, not the war. The difficulties, the real difficulties ... are ahead of us.” But according to the Eurogroup, Tsipras agreed to continue giving the troika a veto over Greek fiscal policies. As the statement put it, “the Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions.”

The Eurogroup however made a small, symbolic concession by referring to the troika throughout its statement as “the institutions,” apparently to help Tsipras pretend he wasn’t breaking a campaign pledge not to cooperate with them.

As for the details of the fiscal plan, the Eurogroup statement made it sound like governments would let the troika’s permanent mission in Athens decide whether they’re credible. It said the preliminary fiscal plan would be reviewed “on the basis of the conditions in the current arrangement” – that is, the latest fiscal plans agreed between the troika and the Samaras government – but “making best use of the given flexibility which will be considered jointly with the Greek authorities and the institutions.”

Just how much flexibility the troika mission will be told is “given” is anybody’s guess. The Greek government’s team in Brussels handed out written comments to journalists after the Friday meeting saying the government would not have to make the tax increases and pension cuts that the former government had promised.

Having made this tentative deal, I would be surprised if Tsipras can’t come up with a plan credible enough to convince European governments to roll over debts coming due through April. But Tsipras has made a lot of populist promises to cut taxes and roll back budget and salary cuts, which will make it very hard for him to get back to even a zero primary fiscal balance after January’s disastrous 20% shortfall of state budget revenues. I doubt the deal will hold.

Looking at the bigger picture, Greece has undergone a large and traumatic internal devaluation since 2010, but it’s still not competitive enough to expect bounce-back growth. It reported a small amount of real growth last year but nominal GDP still shrank. There’s little reason to think Greece can rapidly re-employ its huge numbers of unemployed. Greece is still trapped, unable to get out of austerity without leaving the euro, but more afraid of leaving the euro.

Is Tsipras willing to do exactly the opposite of what he promised? Is he willing to fiscally tighten when he promised to loosen? He has shown that he’s willing to extend the troika’s veto over Greek economic policies while claiming on national television to have parted ways with the troika. We’ll see.

Who Wanted Another Moon Mission When We Could Have iPads

In case you haven’t already seen it, here’s an interesting BBC color piece on a topic near to this blog’s heart.

Greece’s Primary Surplus Was Smaller Than Reported

One of the main issues surrounding Europe’s relationship with Greece is its budget balance. In an ideal scenario, the rest of Europe would like Greece to run a budget surplus and start repaying its debts. At the least, the EU wants Greece to balance its budget and stop getting deeper in debt.

For whatever reason, the language that the EU has chosen to communicate this desire is to specify targets for Greece’s primary budget surplus. Now, there’s not really any good reason to speak in such terms, since what the EU really wants Greece to achieve is a positive overall surplus. But anyway, primary surplus is the lingo the EU has chosen, and that’s the lingo all the journalists and columnists following the story are using, so one has to follow along.

The primary budget surplus is the budget surplus before interest payments. So to achieve a balanced budget, the primary surplus has to equal interest payments. As I've previously calculated, interest payments were around 1.7% of GDP in 2014 and should be around 1.9% of GDP this year, net of previously agreed refunds of interest paid to European central banks and deferred interest on European Financial Stability Facility debt, which gets added to the principal.

So Greece would need to run a primary surplus of at least 1.9% of GDP to balance its budget. Or, to keep its stock of debt from growing, the surplus would have to be a bit more than that, to pay down a bit of debt equal in size to the accumulating deferred interest.

The European adjustment program for Greece targeted a primary surplus of 1.5% of GDP in 2014, 3% of GDP in 2015 and 4.5% of GDP in 2016 on. So the adjustment program was pushing for about a 1% budget surplus this year and about a 2.5% budget surplus in 2016 on.

That might seem clear enough, but the trouble is, not everybody counts the primary surplus the same way. Especially not in Greece, where the religion is Orthodox and the budget data are anything but. So if you’re trying to follow how Greece is doing on those primary budget surplus targets, you need to be aware that there are going to be multiple versions of the story.

Some variations are common across countries. A primary budget balance might refer only to the central government, or it might refer to the consolidated public sector, which in Europe is usually called “general government.” A primary budget balance usually excludes privatization revenues, but might include them – there’s not really any agreement on how to handle those. The targets Europe set for Greece refer to the general government primary surplus, not including privatization proceeds.

You might have read, including in my own previous article, that Greece ran a primary budget surplus of €1.87b or just over 1% of GDP in 2014. The number comes from the Greek government’s State Budget Execution Monthly Bulletin.

But that’s a central government primary surplus, and includes privatization receipts.
And it also includes something highly unorthodox: refunds of interest payments. Since the primary balance excludes interest payments from the expense line, it’s obviously weird and misleading not to also exclude refunds of them from the income line.

This table shows how to reconcile Greece’s published primary balance numbers as best as possible with the standard method:

The Greek count of the primary balance takes state budget revenue, subtracts state budget expenditure and adds back interest payments. The standard method used in the adjustment program takes consolidated government revenues, subtracts interest refunds, privatization receipts and consolidated government expenditure, and adds back interest payments.

By the standard method the primary surplus was €1.17b or 0.7% of GDP, or about €700m less than Greece’s reported primary surplus. The figures for consolidated revenues and expenditures come from a separate government budget bulletin.

Note that any count the EU might eventually publish would surely differ. The EU would use Eurostat data on general government revenues and expenditure, which differ from Greece’s and haven’t been published yet for 2014. And the EU would also make other technical adjustments (see page 22 for the lowdown). The EU doesn’t usually publish primary surplus figures except for countries in adjustment programs. The IMF will eventually publish a 2014 primary surplus figure for Greece, but its method differs from the EU’s and Greece’s.

It’s worth pointing out that as of the end of November the previous Greek government was running a consolidated primary surplus of 1.5% of GDP, by the standard method. But to be fair, the main reason the budget balance deteriorated so sharply in December was simply that the government caught up on budgeted spending. The details are in the table below, which uses the same two series of monthly bulletins going back to September.

Central government expenditure was €1.83b behind budget at the end of November and only €0.98b behind budget by the end of December.

It’s also true that there was a serious deterioration of tax collection in December: tax revenues fell short of target by €706m in December, bigger than the shortfall for the whole of January-November. Rumors have it that January was even worse.

You might notice another, bigger shortfall of interest refunds. That’s because European central banks hadn’t yet refunded the roughly €1.9b of interest that Greece paid them during the year. I’m not sure they ever actually planned to pay the refunds before year-end. But in any case, those refunds are now being withheld because Greece has quit the adjustment program.

(UPDATE: Overall revenues were €935m or 20% short of target in January, according to the January state budget bulletin. That compares to revenues that were €907m or 14% short of target in December, excluding the €1.9b of withheld interest refunds. The January bulletin didn’t provide separate figures for tax revenue.)

(UPDATE2: I clarified the IDs of the budget lines in the second table. “State Budget” is the core central government, not including some off-budget central government bodies. “General government” is the consolidated central and local government sector, but these are advance numbers published by the Greek finance ministry, which differ from those published later by Eurostat.)

(JULY 2 UPDATE: The IMF has confirmed: zero primary surplus in 2014 by their method. I’ll be posting an update soon.)

Europe Girds for Greek Default

A whole lot of pixels have been spilled trying to explain why European central bank governors decided to limit Greece’s access to Eurosystem funds, but the reason is very simple: Europe is girding itself for a probable Greek default on debts to the rest of the European Union. The sad result for Greece will be renewed banking crisis and political chaos.

It’s sad that it has come to this, but so many issues have gotten tangled together and nobody seems to know how to untie them. The crisis is taking on a momentum of its own, crashing along towards the day when Greeks will no longer be able to withdraw funds from their bank accounts. What happens then is unclear, except that nobody will come out of this looking prescient or clever.

As I see it, the biggest failure was that both Greece and its donors refused to face up to the scale of the internal devaluation that Greece needed. So they ended up fighting a losing battle for five years trying to resist overwhelming macroeconomic forces, and ended up with Greeks and Germans bitterly blaming each other for the failure of their efforts.

Perhaps in some future age when Europe is much more integrated than it is today, any similar crises that emerge might be met with the kind of large-scale fiscal transfers it would take to avoid internal devaluation. Or perhaps if Greece was as decisive as the Baltic states in accepting internal devaluation early on, Greece could be standing on its own already, with a viable banking system, a reasonable debt burden and no resentment towards the rest of Europe. Or perhaps Greece was in too much worse of a position to avoid the tragedy that’s unfolding. I guess we’ll never know.

The irony is that, before the Antonis Samaras government collapsed in December, Greece had nearly stabilized on a cash-flow basis. It had a huge and still-slightly-growing debt pile, but creditors were steadily rolling it all over into low-interest debt that wouldn’t come due for two or three decades. Greece had a small primary budget surplus, albeit not even enough to cover the interest on its domestic borrowing. On paper Greece had committed to start paying down debts in 2016, even if nobody really expected that to happen.

But in return, creditors insisted on dictating economic policy. And that’s where things got tangled up.

The creditor-imposed economic reforms served two very different purposes, which weren’t clearly delineated. One was to make Greece a bit more like the rest of Europe, with stronger tax collection and a somewhat more liberal business climate. The other was to implement an internal devaluation in the Greek public sector.

Then those two threads got tangled up with a debate over what kind of union the European Union was going to be. The EU had been born so ambitiously in its first decade that many thought of it as already a de facto federal state. From that idealized perspective, the EU was implementing a kind of voluntary austerity by refusing fiscal transfers on the scale Greece and other states would have needed to avoid internal devaluation. From a more earthly perspective, the EU was a collection of independent states with limited commitments to each other, and Greece should have been grateful that the rest of Europe was lending it enough to allow it to devalue gradually.

All along, both Greece and the official bodies tasked with managing its bailout kept underestimating how much internal devaluation was needed. The Greek government tried to appear that it was resisting overly strict demands, and ended up having to do worse a year later. Bailout officials tried to appear that they were minimizing how much the rest of Europe would have to lend, and ended up having to ask to triple their budget.

And then, just when Greece had stabilized enough that at least it wasn’t borrowing much more, Greeks elected a bunch of rebels who refused to accept the creditors’ conditions. Greeks thumbed their nose at Europe, declaring that they wouldn’t mind if the debts weren’t rolled over. It was a stunningly suicidal move. An act of mad frustration.

By refusing the rollover, Greece headed into battle with the very European institutions that ensure Greek banks have enough liquidity to pay depositors. There will be losses on both sides, but the Greek losses will be bigger by far. The savviest Greeks have been deserting since December, pulling their cash out of Greek banks while they still can.

The Fateful Meeting With Draghi

As I wrote last week, the default is likely to come sooner not later. Greece has a tough schedule of debt falling due in February and March, and not much prospect of reaching an agreement anytime soon to roll it over. Between February 9 and the end of March the government is due to pay more than €3.2b on its foreign debts and long-term bonds, including nearly €2.3b to the IMF, €112m to the Eurosystem and about €850m to private investors.

Greece is supposed to pay more than €9b to the IMF, more than €8b to EU institutions (mostly central banks) and about €1.5b to private creditors from Feb. 9 through the end of this year. The Samaras government was expected to reach a deal to roll over all those payments into multi-decade, low-interest debt to the EU, but that now appears extremely unlikely.

When unnamed people-in-the-know – presumably the staff of Greece’s official creditors – tell Bloomberg that Greece could “run out of cash” by as early as Feb. 25, they mean the Greek government will run out unless it conserves cash by defaulting. On Feb. 24 Greece is due to make a €592m annual interest payment to private investors who took part in its 2012 debt restructuring. This Thursday, Feb. 12, the government is due to repay about €740m of its very first bailout loan from the IMF from May 2010.

Further out, Greece is due to repay almost €7.5bn to European central banks in July and August. It was those amounts that were on Mario Draghi’s mind during his fateful Feb. 4 meeting with Yanis Varoufakis. Unwilling to talk to the IMF, the new Greek finance minister asked the European Central Bank chairman to let the Greek national central bank fund the Greek government’s near-term debt repayments.

Varoufakis proposed that the Bank of Greece be allowed to lend €10b to Greek commercial banks so they could buy an expanded issue of short-term government debt, which would be used to cover near-term debt payments. Varoufakis also planned to ask the EU for authority to reallocate €10.9b of funds lent to Greece for bank recapitalization, which weren’t used and are due to be automatically repaid when the current adjustment program expires at the end of February. While spending those funds, he and Greece’s new prime minister, Alexis Tsipras, would negotiate with the rest of Europe on some kind of debt relief.

Most coverage of the story has focused on the new government’s demand for debt relief, but the hottest issue was probably Greek economic policy, which Tsipras especially wants to turn sharply to the left. For all its progressiveness the European mainstream remains fundamentally economically conservative. Draghi wanted to hear how Greeks are going to be successful capitalists and pay back their debts. Varoufakis is a leftist economics professor with a theory that the more productive benefit by subsidizing purchases of their products by the less productive. It must have been an uncomfortable exchange.

Varoufakis’ plea for what he called a “bridge loan” while negotiations proceeded might have been approved if Draghi had heard what he considered to be a credible long-term plan. But evidently Draghi didn’t hear that. He seems to have gone more or less straight from the meeting into a conference call with other central bank governors, where he apparently gave an unflattering summary of what Varoufakis had to say. The council then voted to essentially prepare for default.

How the ECB Tried to Limit Europe’s Losses

The vote has been widely understood as an effort to deliberately create a problem for Greek commercial banks as a way of applying pressure on the Greek government. I don’t believe that was the motive. The ECB council was trying to shield European governments from losses in the likely event of a Greek default.

What the council did was revoke ECB support for Bank of Greece loans to Greek commercial banks that are collateralized with debt issued or guaranteed by the Greek government. Such loans were considered standard ECB-authorized refinancing, which meant that if the bank failed to repay the loan and the government defaulted on the collateral, the resulting losses would be the shared responsibility of all Euro Area central banks. As of Feb. 11, such loans will be reclassified as “emergency liquidity assistance” (ELA), and the BoG will bear full legal responsibility for any losses on them.

The ECB was anyway scheduled to withdraw its support on March 1 for BoG loans collateralized by government-guaranteed debt, for reasons unrelated to the recent dispute with Greece. But at the pace of recent events, even a few weeks mattered. Besides, that deadline might have been postponed if the ECB council had been differently disposed. If Samaras were still in power and creditors were still rolling over Greece’s debts, Greek banks might have been ready by March 1 to do without such loans.

The ECB council also capped the total amount that Greek banks can borrow from the BoG, which limits the EU’s losses in the event of a Greek exit from the euro. I don’t expect Greece to leave the euro – I think the Tsipras government would collapse if it tried – but the threat is hardly an abstract one. BoG loans to Greek banks, whether ECB-authorized or not, are a kind of contingent liability for the rest of the currency union, which could fall on other European governments if Greece were to exit the euro and reject the BoG’s liabilities to other European central banks.

This is due to the way the euro currency union was set up, with the assets that back euros distributed among a network of national central banks. If any national central bank leaves the system and takes its assets with it, the corresponding euro liabilities would remain the responsibility of the currency union. So the rest of the currency union’s governments would have to inject new assets to back them.

How the ECB Doomed Greek Banks

By acting to shield European governments, the ECB council inevitably doomed Greek banks. There was no way to do one without the other.

Greek banks have been relying on loans from the Bank of Greece to pay exiting depositors and money-market lenders as they have steadily withdrawn funds since December. European central bank governors effectively put a cap on the maximum amount of those BoG loans, which means they effectively capped the amount of cash that can be taken out of Greek banks. It won’t take long for depositors to make that connection and grab their money while they can.

In the same ECB council conference call, governors set the limit on Greek ELA at €59.5b, according to another person-in-the-know talking to Bloomberg (for some reason I’ll never understand, the cap is an official secret). On top of that, Greek banks should still be able to borrow up to about €40b from the BoG through standard refinancing using their foreign assets, which consist mainly of €37.3b of European Financial Stability Facility notes received through the EU-funded recapitalization of Greek banks in 2012-2013.

However, some of those EFSF notes are already pledged for private interbank credit, so the effective limit on Greek banks’ borrowing from the BoG could be as low as around €80b. Greek banks’ borrowing from the BoG stood at €56b at the end of December, up from €45b a month earlier. That increase covered more than €10b of withdrawn private funding during December, including more than €5b of deposits. There are credible estimates from major banks and credit agencies putting the current amount of Greek banks’ borrowing from the BoG at €70b-€75b. It appears that Greek banks are very close to running out of cash.

And then, well, I don’t know what happens then. On one hand it would be very difficult for this government to submit to the sort of tough conditions that Europe would insist on to fund a second bailout of Greek banks. On the other it would be very difficult to take Greece out of the euro, as there’s no support for that and this government has categorically promised not to do it. Most likely, bank deposits will sit frozen for a while as support for Tsipras plummets and pressure on him mounts in parliament and on the streets.

What we’re seeing in Greece is a demonstration of the main weakness of pure parliamentary democracy. It’s great at avoiding gridlock, because it gives power to parties that win as little as a third of the popular vote. But that can be a really lousy way to go in a time of crisis. It brings to power radicals who lack broad social trust right at the moment when that trust is most needed.

Enough Greeks voted on Jan. 25 to bring this government to power. But enough Greeks have been voting since December with their bank deposit withdrawals to bring this government down. As I wrote in my previous post, given the ties between two ministers in this government and the darkest elements of the Putin regime, it will be good riddance anyway.

A Grim Schedule

Below is a list of Greece’s major debt payments, larger than €50m, due since Jan. 25 through to the end of the year. This schedule doesn’t include any short-term bills or domestic loans. It also doesn’t include repayment of loans to the European Investment Bank, which I couldn’t find information on, or interest due to the EIB, which I estimate will come to about €300m during the year. Likewise it doesn’t include interest owed to EU governments on loans disbursed during the first stage of Greece’s bailout in 2010-2011, which I estimate will also come to about €300m during the year. The listed payment due to the EU and EIB is for bonds they purchased in the ECB-led bond-buying program in 2012. The amounts listed lump together any principal and interest due to a single creditor group on a single day. Since I haven’t heard otherwise I’m assuming the Feb. 1 payment was made.

Sources include: the IMF, which publishes payments due to it; a Greek government announcement of bonds issued in the original restructuring; Borsa Italiana pages like this one showing amounts of those bonds not bought back; three separate government announcements detailing the bonds that weren’t restructured; a Greek-language government gazette that detailed the bond holdings of the ECB, NCBs, EIB, EU and their totals, and described special bond issues in 2012 that were exempted from restructuring; and a government debt bulletin that lists recent bond issues and the partial roll-over in 2014 of another bond exempted from restructuring.

(UPDATE: It has emerged that European central banks are also refusing to release the €1.9b of interest Greece paid to them during 2014. Greece had an agreement with them that they would refund all interest Greece paid to them at the end of each year, so long as Greece was taking part in its adjustment program. In other words, apparently the ECB governing council also made a determination that Greece has exited the adjustment program and therefore isn’t eligible for the refund. This further confirms that the ECB is girding for default. It also means that in the unlikely event the EU makes some kind of short-term deal with Greece, the €1.9b could cover Greece’s debt payments through early March.)

(UPDATE 2: On Feb. 12 the ECB council voted to increase the cap on Greek ELA by €5.5b to €65b. That indicates Greek banks were near to running out of cash already by that date. It’s likely that some of the funds were somehow funneled to the government to pay the Feb. 12 payment to the IMF. The amount is small enough that Greek banks will remain on the brink of running out of cash and dependent on further cap increases to pay depositors.)