When will Greece run out of money?

In order to answer the question of when Greece might run out of cash, let’s start at the top of the debt mountain. The country owes €323bn (£238bn), which is more than 175% of its GDP. About three quarters of Greek debt is owed to the EU and the International Monetary Fund (IMF), two of the three members of the troika that has rescued the country with a contentious bailout package.

Since 2008, the Greek economy has shrunk by about a quarter. It has only recently returned to anything resembling growth. At the peak of the crisis the unemployment rate passed 28%, and among young people it reached 60%. The overall jobless figure remains stubbornly high at just under 26%.

The latest chapter in this odyssey is over the extension of Greece’s bailout. It adds up to about €240bn. Broadly speaking, most of the financing disbursed so far has gone towards servicing debt – so not state operations such as paying teachers and doctors, or at least not directly. To be clear, unable to raise money elsewhere, Greece would most probably have found itself unable to pay salaries – and out of the euro. For the sake of detail, it’s important to know where the bailout money went:

The most recent impasse is over the terms of the latest phase of the bailout, which amounts to €172bn and expires at the end of this month. The recently elected Syriza government wants to renegotiate the terms of the agreement.

It wants to revisit policies, such as privatisation, public sector headcount and labour market deregulation, and to be granted the flexibility to spend money to increase the minimum wage, create jobs and ignite growth. It also wants to tie debt repayments, which it has pledged to repay in full, to future growth, and to see a reduction of the previously agreed primary surplus target from 4.5% to 1.5% of GDP. This means that once interest payments are stripped out, tax receipts would exceed government spending by 1.5% of national output, a lower total that would give the prime minister, Alexis Tsipras, more money to spend.

On the issue of the surplus at least, there should be room for manoeuvre. Fiscal rules have been broken before. In fact, the first EU member states to do so were Germany and France in 2003. Back then, the two countries even avoided punitive sanctions.

Greece’s 18 eurozone partners have, however, remained adamant in saying that Athens has to stick to the existing memorandum of understanding, which includes austerity measures such as a public spending squeeze and a privatisation programme. Greece is expected to seek a temporary extension on its loan agreement , while seeking changes to the austerity policies demanded. This would buy time in order to renegotiate the wider agreement. Neither side has so far budged from their respective positions.

Without a deal Greece is likely to run out of money. The question is when – and the answer is complicated.

According to figures released on Tuesday by the Bank of Greece, the finance ministry estimates that cash reserves will run out on 24 February. Using the reserves of government entities to cover short-term needs, however, the problem could be delayed until March.

Between now and the end of March, Greece has to repay €2.3bn to the IMF and to roll over €5.7bn in treasury bills, and according to estimates the country will need extra finance of €4.3bn.

In the past, two rounds of relief were applied to Greece’s debt burden, which extended the maturity of the country’s debt to an average 16.5 years, double that of Germany and Italy, and also provided an interest rate cut. The interest rate on Greek government debt in 2014 was 2.6%, only marginally above France’s 2.2%.

Because of this, on paper at least, Greece’s payments for 2015 are not exorbitant. In total, €6.7bn in bonds mature this year, repayments of €9.8bn are owed to the IMF, and the country has to roll over €14.5bn in treasury bills, which are mostly held by domestic banks.

It is, of course, all relative though. As things stand, Greece will be unable to repay the €7bn or so in European Central Bank (ECB) bonds that mature in July and August unless it receives further help.

To complicate matters even further, government debt is only one part of the equation. Greek banks risk running out of money too, and haven’t collapsed all together because of support from the ECB’s emergency liquidity assistance (ELA) programme.

This line of assistance was increased by €3.3bn to a total of about about €68.3bn on Wednesday night, reflecting the amount of capital fleeing the banks over the past few weeks.

According to JP Morgan, Greek banks are losing around €2bn in deposits a week. If this pace of outflows continues, the sector will run out of collateral for new loans in 14 weeks. Greece is using its emergency funding fast and is rapidly nearing the ECB cap. And the ECB has already told the banks that it will not accept Greek sovereign debt as collateral.

To date, Greek banks have had access to ELA primarily because the country has complied with the terms of its bailout. If, and it’s a big if, the ECB were to ever pull the plug on Greek banks, the country’s financial system would collapse, and Greece itself would de facto lose its last line of credit.

It is hard to see how the house of cards would not then come tumbling down. Simply put, Mario Draghi, the ECB president, holds a sword over Greece’s head.

Trying to predict what happens next is difficult. As always with EU affairs, economics compete with politics. Numbers and indicators only tell half the story of a union that was built and designed on an idea, that unlike money, was meant to last for ever.