21 June 2011 Last updated at 13:21 ET

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http://www.bbc.co.uk/news/business-13854962

21 June 2011 Last updated at 13:21 ET

Why Greece needs another 110bn euros

Greece's current predicament can be told in numbers, big ones.

The national debt is around 340bn euros.

That is one and a half times the value of everything the country produces, its

GDP, or 30,000 euro for every Greek citizen

But even so, Greece continues to borrow, at a rate of more than 20bn euros a

year, because of a deficit (the gap between what the Greek government spends and

what it brings in from tax revenues) which is running at 10% of GDP every year.

Little wonder then that banks and commercial investors no longer want to lend to

Greece. They fear that Greece has borrowed more than it can ever repay and that

they would not get their money back.

But if Greece defaults on its debts, that will make its own banks insolvent and

do severe damage to banks and financial institutions in Germany, France, the US

and elsewhere (not exactly a secret, that).

'Painful truth'

So just over a year ago Eurozone governments and the International Monetary Fund

promised to provide Greece with emergency credit of 110bn euros

It wasn't enough. From 2012-2014, Greece has to find something like 170bn euros

or 180bn euros to repay maturing debts and finance the government.

So with what's left over from that original emergency loan, Greece probably

needs another 110bn or 120bn euros or so of additional finance (

Papandreou, Greece's premier, put the requirement at 110bn euros over the

weekend).

Germany, France and other Eurozone governments don't want to provide all the

extra money - which is why they're putting pressure on Greece to contribute

about 30bn euros through privatisations and on banks and investment funds to

lend 30bn euros or so back to Greece from the cash they receive when existing

Greek loans mature.

Goodness only knows whether that 60bn euros from privatisations and so-called

private-sector involvement will turn up.

So the potential increased exposure for Eurozone taxpayers of between 50bn euros

and 120bn euros is sufficiently large to provide quite a big incentive for the

British government to argue that Greece isn't its problem.

Which is why Cameron, the British prime minister, is insisting that the

the UK won't be part of the solution.

Right now, there doesn't seem to be huge pressure from Eurozone governments for

the UK to chip in - although the German finance ministry is angling to find a

way to hook Britain into the rescue.

The painful truth for Britain is that a Greek default that precipitated big

losses on loans to Ireland, Portugal and Spain would be immensely unpleasant for

the UK's supersized banks - and, by implication, for British taxpayers too.

And the UK could hardly insulate itself from a Eurozone tipped back into

recession, were that to be the consequence of a disorderly Greek default.

In other words, there could be circumstances in which it was in the British

national interest to contribute to a Greek rescue (not that you'll here prime

minister or chancellor admit that, in anything other than conditions of a clear

and present danger of Greek meltdown).