Greek bonds today traded at around 6.3%. With a total float of $402 billion, Greece’s annual debt service bill would be $26 billion if the whole debt were financed at this yield. That’s a bit over $6,500 a year in annual debt service for Greeks who actually have a job (4.95 million workforce minus the 20 percent unemployed), or about 20% of per capital income of $32,500.

The problem is simple: increases taxes to reduce per capita income by 20% to pay for the existing level of debt (of course, the economy would collapse and the deficit would rise). It simply doesn’t add up.

From the 3:1 coverage ratio at this week’s Greek government auction, it appears that EC governments have told banks not to worry and buy the paper. But the time bomb continues to tick.

This entry was posted on Friday, March 5th, 2010 at 7:25 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.