In its latest report, the troika highlights three problems with the Greek bailout:
- Implementation of the plan by a weak government coalition.
- Court challenges to budget cuts.
- A chance that spending cuts in 2013 will lead to a greater reduction in GDP and government revenues than projected.
This chart shows why #3 is what will force Greece to apply for a fourth bailout by the fall. Privatization receipts are supposed to earn €1.7bn in revenue next year. Since the Eurocrisis started, privatization receipts always have been slated to bring in revenue next year, yet so far a few million euro has been realized by sales of state assets. You can take that €1.7bn out of the budget picture.
In addition to privatization shenanigans, the troika has consistently overestimated the amount of revenue that the Greek government will earn. 2013 will be no different. Add another €3 to 5bn to next year’s deficit based on the trend from prior year’s misses. Under this more realistic scenario, a budget gap of at least €5bn will open up by the fall.
The ECB at the behest of Germany will fill this hole by allowing Greece to issue more T-Bills with a 4th bailout to come after German elections in the best case scenario. If revenues plunge more severely, the bailout will not wait until the fall.