Which coun­tries stand to lose big from a Greek de­fault?

Financial Mirror (Cyprus) - - FRONT PAGE -

The IMF has turned up the heat on Greece’s Eu­ro­zone neigh­bours, call­ing on them to write off “sig­nif­i­cant amounts” of Greek sov­er­eign debt. Writ­ing off debt, how­ever, doesn’t make the pain dis­ap­pear—it trans­fers it to the cred­i­tors.

No doubt, Greece’s sov­er­eign cred­i­tors, which now own 2/3 of Greece’s EUR 324 bln debt, are in a much stronger po­si­tion to bear that pain than Greece is. Nev­er­the­less, we are talk­ing real money here—2% of GDP for these cred­i­tors.

Ger­many, nat­u­rally, would bear the largest po­ten­tial loss — EUR 58 bln, or 1.9% of GDP. But as a per­cent­age of GDP, lit­tle Slove­nia has the most at risk — 2.6%.

The most wor­ry­ing case among the cred­i­tors, though, is heav­ily in­debted Italy, which would bear up to EUR 39 bln in losses, or 2.4% of GDP. Italy’s debt dy­nam­ics are ugly as is — the FT’s Wolf­gang Mun­chau called them “un­sus­tain­able” last Septem­ber, and not much has im­proved since then. The IMF ex­pects only 0.5% growth in Italy this year.

Italy’s IMF-pro­jected new net debt for this year would more than dou­ble, from EUR 35 bln to 74 bln, on a full Greek de­fault — its high­est an­nual net-debt in­crease since 2009.

With a Greek exit from the Eu­ro­zone, Italy will have the cur­rency union’s sec­ond high­est net debt to GDP ra­tio, at 114% — just be­hind Por­tu­gal’s 119%.

With the Bank of Italy buy­ing up Ital­ian debt un­der the ECB’s new quan­ti­ta­tive eas­ing pro­gramme (QE), the mar­kets may de­cide to ac­cept this with equa­nim­ity. Yet

Newspapers in English

Newspapers from Cyprus

© PressReader. All rights reserved.