The MasterCharts: The Collapsing Greek Income Statement, Or Why Greece Is Doomed
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Thursday, June 16, 2011

The Collapsing Greek Income Statement, Or Why Greece Is Doomed

The Collapsing Greek Income Statement

With everyone focused exclusively on the Greek balance sheet, where apparently the market has now realized that you don't cure unmanageable debt with yet more debt (something the Troica will figure out just as soon as the eurozone breaks apart), a far more important statement is the country's P&L, or income statement. After all, if a country can not grow into its balance sheet with excess cash at the end of the day, all bailouts are completely irrelevant....
Egan-Jones', a rating agency that has proven infinitely better at predicting the future than Moody's or S&P, summary of what to expect:
End of the line - although Greece is likely to receive additional funds, those funds might be senior to existing debt and both creditors and Greece's patience is waning. The rise in interest rates is likely to place an unbearable burden on the issuer and the austerity measures will further pressure GDP. The Hellenic Statistical Authority cited an accelerated contraction in domestic demand and a fall in consumer expenditures with the decline.

We expect that Greece will be forced to restructure its debt within the next 2 to 18 months; it cannot sustain significant additional budget cuts, the tepid economy, restricted capital raising, and 20+% interest rates. Greece's stated debt is EUR329B, GDP is EUR230B, and the federal budget deficit is EUR3.8B before interest expense and EUR16.4B after interest expense. The country has failed to meet its initial deficit target of 8.1% of GDP for 2010 as agreed to under the joint IMF-EU bailout terms in May 2010.Meanwhile, Greek debt (currently the highest in the EU at 127%) is projected to reach 160% of GDP in 2011. Austria withheld funds due to Greece after claiming the country has failed to meet its spoken commitments for the EU bailout package

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