The Greek government owes about 340 billion euros.
Let's get some perspective on that. I find the best way to understand big numbers is to scale them down.
Let's imagine the Greek government is a man who owes $34,000 to the banks. Let's evaluate his financial position.
MR GREEK GOVERNMENT: INCOME AND EXPENDITURE
2009: earned $4,800, spent $7,800 - $3,000 too much! Not good.
2010: earned $5,300, spent $7,200 - $1,900 too much! Better, but still not good.
2011 plan: aims to earn $5,600, and spend $7,200 - $1,600 too much! When will he learn?
What would you say to someone who consistently earned around $5,000, but spent around $7,500?
Would you say he was likely to repay his debts of $34,000?
No. So everyone in Europe is giving up, and letting him off at least half the debt, as long as he reins in his spending.
WHAT ABOUT MR UK GOVERNMENT?
Let's do the same thing with the UK.
Mr UK Government earns and spends about 10 times more than Mr Greek Government.
2009: earned $53,000, spent $63,000 - $10,000 too much!
2010: earned $52,000, spent $67,000 - $12,000 too much!
2011 plan: aims to earn $55,000, aims to spend $70,000 - $15,000 too much!
Would you say he was likely to repay his debts of $90,000?
Well, as a proportion of his income, the debt is a bit more manageable.
But Mr UK Government's overspending, as a proportion of his debt, is actually worse!
EVALUATING MR UK GOVERNMENT
Most official evaluations suggest Mr Greek Government will not repay his debt - he has the world's worst credit rating.
Most official evaluations suggest Mr UK Government will repay his debt - he has the worlds best credit rating.
WHY THE BIG DIFFERENCE IN CREDIT RATING?
Imagine a herd of sheep in a field, surrounded by wolves.
Some sheep are in the middle of the herd, and some on the edge.
The sheep are the governments of Europe, and the wolves are the creditors.
Which sheep are most at risk? - the ones on the edge.
The Greek Government is on the edge; the UK Government is near the middle of the herd.
The wolves are picking off the sheep on the edge.
Therefore, it is the wolves' priorities, not the sheep's, which explain the situation!
IN SUMMARY
Mr Greek Government earns $5k, spends $7k, and owes $34k. He has the world's worst credit rating.
Mr UK Government earns $50k, spends $70k, and owes $90k. He has the worlds top credit rating.
AFTERTHOUGHT
Mr Saudi Government earns about $20k and spends about $17k, a surplus of about $3k.
He only owes about $8k.
All very sensible.
Yet he has only the fourth best credit rating on the scale - worse than Mr UK Government.
