Mathematics can be deadly.

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Greece's Imaginary Numbers

Mark Gilbert is a Bloomberg View columnist and writes editorials on economics, finance and politics. He was London bureau chief for Bloomberg News and is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”
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Mathematicians use "imaginary numbers" for abstract concepts such as the square root of -1 (which, since you asked, has two answers: i and -i). The European Union seems to be using a similar trick in constructing a bailout for Greece. Unfortunately, the magic that works for arithmetic seems likely to doom the rescue efforts in Europe. Here's a selection of the numbers that could add up to disaster for Greece.

50 Billion Euros

As envisaged, the bailout plan will ring-fence about $55 billion worth of Greek assets, ranging from ports to airports to the Parthenon (I might be kidding about the Parthenon). They will be put into a special fund and sold to repay debt, recapitalize the banks and make unspecified investments to boost growth in the future.

But consider that the proceeds from the Greek privatizations already underway are set to raise a skimpy 4 billion euros. Moreover, the market capitalization of one of the nation's best assets, the Piraeus Port Authority, is about 333 million euros -- down 23 percent in the past two years. "I don't think we will proceed with real privatizations of these assets," Greek Economy Minister George Stathakis told Bloomberg Television, adding that the holdings required to reach that sales total "obviously do not exist."

If even Greece's economy minister doesn't believe there's 50 billion euros worth of family silver to backstop new loans, why should anyone else?

200 Percent

In the next two years, Greece's debt will peak at 200 percent of its gross domestic product, the International Monetary Fund said in a report published overnight. Less than a fortnight ago, the IMF's prediction was just 170 percent. Both figures are a million miles away from the 60 percent ratio that the original Maastricht Treaty set as the qualifying target for any country to be deemed economically worthy of euro membership.

The issue of debt rescheduling (or reprofiling or moratorium or extension or whatever euphemism you choose over "Greece can't afford its repayments") is slowly coming to the fore. The truth is, Greece's economy is so trashed that no one really knows just how indebted the nation will end up being.

Two Years

That's how long capital controls lasted in Cyprus, after it went bankrupt. Greece's banks are still shuttered, and its people are still restricted to withdrawing 60 euros per day from ATMs. Meanwhile, the banks are running out of the collateral they need to borrow from the European Central Bank, and will need an infusion from the European Stability Mechanism. According to the European Commission:

In the absence of support by the ESM, financial stability risks for Greece will not be manageable and the banking sector will inevitably collapse.

Greek banks have been closed since the end of June, and it's still anybody's guess when they'll be able to reopen. But, as Cyprus showed, once capital controls are in place, it's very hard to loosen them without every last remaining euro trying to escape.

Related: Greece Default Watch

3.5 Billion Euros

That's how much Greece is scheduled to repay the ECB on Monday. A month ago, if you'd asked just about anyone what the repercussions might be of Greece failing to pay, they'd have replied that it would mean the country exiting the euro. Today, it's just another imaginary number. Greece is already in arrears to the IMF, and has missed so many deadlines that blowing past another one will hardly matter.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author on this story:
Mark Gilbert at magilbert@bloomberg.net

To contact the editor on this story:
Mary Duenwald at mduenwald@bloomberg.net