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Who Will Be Hurt The Most If Greece Defaults
With less than 20 days left until the Greek general elections, bluffs, counterbluffs, speculation, and propaganda are running wild, all of which, however, can be reduced to the following simply question: who has the leverage? Is it still Greece, which can play the Eurozone like a fiddle demanding anything, and knowing that a Grexit, while suicidal for Athens, would be just as suicidal for Brussles, or your classical Mutual Assured Destruction layout; or is it Germany, which in the past two weeks has seen its pro-Grexit rhetoric pick up to unprecedented levels, repeating on various occasions that Greece is "no longer systematically important", and that Europe will no longer be "blackmailed" by Syriza's demands for an end to austerity (which in Europe has become a code word for government corruption and incompetence).
The point of this post is not to speculate one way or another: there are many other articles that have laid out both sides of this complicated dance which takes place in what is supposed to be a monetary if not (and never will be) fiscal union, but to inquire who would be hurt the most if Greece defaults, i.e.who is the biggest owner of Greek debt.
For the answer we go to today's Bloomberg Brief which gives the answer:
Who owns Greece's public debt? That's the 322 billion-euro question, according to the Finance Ministry's figures from the third quarter of last year. Most of the debt has changed hands since a bailout in 2010, a second in 2012 and a restructuring involving private creditors that same year. Private owners now hold only 17 percent. The secondary market has become very thin — bear that in mind when looking at 10-year bond yields. ... A default would have to be absorbed instead by official creditors, holding the remaining 83 percent of outstanding loans and bonds. These include euro-area governments (62 percent), the International Monetary Fund (10 percent) through its participation in the two bailouts, and the European Central Bank (8 percent), which purchased bonds in 2010 through its Securities Market Program. The remaining 3 percent are repurchase agreements and assets held by the Central Bank of Greece. It is unclear where losses on that portion would fall.
The chart is below:
All of that is largely known, yet Bloomberg does bring up a relevant point: "The nominal amounts at stake do illustrate the motives for German resistance to restructuring. Yet a more relevant measure would adjust for a country's ability to absorb those losses. The picture radically changes when that exposure is expressed as a share of 2013 nominal GDP. On this ranking, Germany falls to No. 9 with an exposure amounting to 2.2 percent of its economy's size. France falls to No. 8 (2.2 percent) and Italy to No. 7 (2.5 percent). Portugal (3.2 percent), Cyprus (2.8 percent) and Slovenia (2.6 percent) top the ranking, meaning these countries have the most to lose if Greece decides to write down its public debt."
Recent comments from national leaders in Europe don't reflect those rankings. Germany has sent the strongest warnings against a Syriza-led government, yet the country isn't the most at risk — at least not in terms of GDP. The silence of euro-area nations with greater exposure might have something to do with the fact that they may have to negotiate their own restructurings. (For example, see “Spanish Default Risk Rises as Euro-Area Inflation Slows,” here on Bloomberg.) In the meantime, those countries might save face by keeping quiet.
In other words, those countries who have least to fear are the most vocal and most eager to remind everyone there will be no contagion. Of course, those countries which will be crippled by Greek contagion, have yet to utter a peep.
What Bloomberg forgets, however, is that contagion - once broken out - will impact not just countries but corporations and, more improtantly, banks. And nobody stands to lose more than Europe's biggest bank by a mile: Deutsche Bank, the one bank which like Portugal, Cyprus and Slovenia has kept its mouth resolutely shut on the topic of a potential Grexit as soon as a few weeks from now.
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... some politicians make me wish I have more middle fingers ...
Germany can afford to burn 50 billion.
The French -- not so much.
Those Greek bonds are all under Emglish law. This means Greek is not able to default on them. Just sayin.
If Greece defaults, the Germans will just sell it to China.
Problem solved!
Ah, is this a trick question? Govt/Bankers won't feel any pain unless there is a revolution. It will be who it always is, the people.
Exactly. Greek debt has been off loaded to the public secotr, just as trillions of bad US mortgage debt was. The losers won't be the banks, but the people who never agreed to buy this worthless crap to begin with.
The greek people? They lived like Jeffrey Epstein on their nice little islands, nailing young girls and boys and not working. Now, not so much.
"WHEN" Greece defaults...
Spain, Italy and France, they hold a lot of paper and not just with Greece. Could make the Draghi waltz pretty tough with the minefield spread everywhere.
Since when does the "Law" matter anymore. Greece will default if the peeps want it to happen. Personallly I think this all a ploy to get the ECB to buy the Greek bonds as well as a good percentage of debt forgiveness. As far any any CDS Event, well, that is riding bareback on the Unicorn.
not able to default
Maybe you should reread Christian Morgenstern's "The Impossible Fact"?
https://www.youtube.com/watch?v=Zvl9N9GdraQ
Patos never gets old.. schnitzle-face.
"Why is a German trying to take over the world? Because he's a German."
whenever any of these countries suffers even worse from bonds, bail-outs and the like (see argentina, greece, iceland) it is perfectly justified to default on these predatory practices. and the predators should have no legal recourse whatsoever. the sovereign's failure was what they were aiming for all along.
Some politicians make me wish I....... well I can't say because I'm not ready to be taken to my designated FEMA camp yet.
I love my NSA overlords.
Breathe easy. If you get loaded into a boxcar with shackles and Chinese markings, allegedly you'll never see a camp.
Its pork from Smithfield!
and thats because the issuers never take the haircut for issuing this crap. the squid roundtrips it 3X's over until it ends up in the hands of....get ready.....YOU and ME
... either way, recall the script from last round - it won't be declared a credit event, so credit default swaps will be worthless.
Exactly ... first lather, then rinse thoroughly, and then repeat ... Or put more simply .... 'It puts the lotion in the basket or else it gets the hose again' .... (my personal favorite)
I noticed Greece isn't on the list.
Since when have the people ever mattered, Doc? (shakes head sadly)
Last chart I saw was that around 45% of all Greeks were living at the poverty level. (shakes head sadly)
Precisely, thanks for making my point even clearer.
Latvia and Luxenburg need to pick up the pace..they are way behind....
with a global system /finance "centralize planning" , any country that goes down , they all go down, specially if it is a western country
Tide's going out...you ARE wearing yer suit, yes?
Stop! They will never let greece default. Silly to even ask what ifs.
"Private owners now hold only 17 percent...euro-area governments (62 percent), ... and the European Central Bank (8 percent)..."
So, 17% + 62% + 8% = 87% is on the Euro taxpayers.
the fall out for nations is small; the QE to avoid it will be awesome, as it must satisfy (basket case) future potential situations in Spain & portugal.
The ECB package of QE must either propose loans as 1% or a mix of writeoffs and loans that are compatible with Greece's future capabilities.
As long as oil and Euro stay weak the Euro economies could pick up if the banks don't fold when asset correction occurs.
Lots of IFS...January 25 is gonna be a date to remember if the voting is honest.
From past reports Greek Election results were always FIDDLED.
The Dead and the ones that emigrated voted in their absence.
Yes they are Honest my ass.
Plutocrats' plans to build the empire
But it's a perfect time astrologically to "start something new", i.e. get with Liga Nord in Italy, Spain, Portugal, and now Greece....and do a deal. The southern half of Italy joins up, and voila'---they officially create the "South Rim" with its own currency, the SEU, or better known as the "Pee-Yew", P-U, or whatever stinky acronym will fit.
Hey, it'll work...the stars are aligned!
default? don't talk to me about defaults! default? you kiddin' me? default?....
the bailouts will continue until morale improves
Well definately NOT the Greeks.
Debts are always repaid. Payment is made by either the borrower or the lender. In this case, it will be the lenders. It is obvious from the goings on of the last few years that the Greek government cannot service its debts, much less repay them. It is time for everyone to accept what everyone already nows. The government of Greece will default and lenders will suffer for the stupid decision of lending to the government in the first place.
Yes, the borrower might find some greater fool, future lender but in the end the borrow will not be paying off the loan.
Italy will likely be forced to repudiate responsibility for it's portion.
Even while running surpluses during the austerity phase Italy's deficit has grown precipitously due to the debt overhang/compounding interest payments.
I continue to stanchly maintain that 'govenment debt' is NOT in fact debt as it is not designed to be repaid and satisfied but is in fact a proxy legalist certification of the feudalist collateralization of potential productivites and resource extractions: in effect the sale of potential future tax revenues aka taxpayers.
However, if govenment debt is debt, there is far too much of it to ever be paid back under present rates of productivity and resource extraction.
IMHO, repudiation and default or severe restructuring of most existing government debt loads is preferrable to a devolution towards outright feudalism and globalist oligarchal dominion via the interlocking neo-globalist banking ponzi.
here my two cents on the whole thing
executive summary: until 2023, Greek debt-to-GDP is, for all purposes, as if it was at roughly 40%.
because the remaining 130% -something are interest-free until 2023
and so I question who would really want to default now on that, except as a political principle position for the electoral campaign
http://www.zerohedge.com/news/2015-01-06/bild-warns-german-govt-fears-gr...
As with every borrower, the borrowed money has already been spent so it really isn't a question about defaulting on an interest free loan it's a question of how to get the next interest free loan. Germany is adamant that there be no more lending unless there are reforms. The Greeks will be deciding: reform or default.
Nobody would want to default on a deal that attractive unless the cost of servicing the debt is beyond the fiscal abilities of Greece.
Sure they would want to IF by eliminating all or most of the debt they get a fresh start in pulling in a new group of suckers. Don't believe me, just look at the new housing loans being offered.
Greek debt is like US debt is like Japanese debt. Technically it is never getting paid off. Current bond holders might get paid off because the governments issue new bonds to new bond holders but at the end of the day someone will be holding on to worthless paper promises. See paying off credit cards with other credit cards until you die.
What happens if Putin bails out Greece?
Putin is under too much fiscal pressure to do that right now without bringing down Russia.
There is a shell game of foreign debt in Russia.
When Russia defaulted in 1998, no one was willing to loan to Russia. So, Russia, as a majority owner in most of its enterprises - meaning energy and arms - simply allowed those enterprises to take on the debt.
Like Fannie Mae and Freddie Mac in the US, those debts are booked as private and not affecting the Russian Government.
But again like Fannie Mae and Freddie Mac in the US, the government is explicitly on the hook for those debts.
If Putin were to bail out Greece then Russia's military modernization programs get shelved, and Rosneft, Gazprom, and the rest of the Russian Energy economy has their ability to deal with Saudi Arabia's shenanigans cut in half...or more.
For Putin that equates to a huge risk related to bailing out Greece, with only a small payoff.
Chinese have some $1,300 billion to spare...
this analysis is total bullshit.
if greece defaults, the blowback cannot properly be quantified because it creates dominoe effect feedback loops---i.e. a stampede of possible panic, which , in turn creates monetization .
money, as always will be printed in streams to prevent panic, the only question is how the turbulence of free money and full panic interact. 2008 led to 2009 led to 2010 led to now.
The Greek default is already a fact. There's only to decide if it should be made official or should we fool ourselves a little bit longer. Paying them money to be able to repay former credits back... Who are they fooling? Germans will never see any of the money, so why all these charades? Make it happen already.
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At this stage, the Greeks will stay in the EU if they can get "paid," otherwise they are splitsville and while this doesn't come without hardships if I were German I would be afraid, very afraid.
As the article points out, this is the tip of the iceberg..to have the real story, you have to layer on all the PIIGS debt on top of the "G" here because instantly, all the others will extort much better deals, their markets will dry up and again, F, Ger and the ECB will be eating much greater losses...up at 10% of GDP...anyone going there? I don't think so, Syringa will extort anything they can claim will make lives better for Greeks which will be little to nothing without denouncement.
This really is not much of a choice... Greece demands additional money from others... Just to default later. There is zero chance for them to repay anything... EVER. So we can imagine what is about to happen eventually. Better sooner than later.
as usual, everyone's using common-sense, and financial practicalities, and not looking at the big picture, the means to the end, NWO.
first off, when trying to get human-beings to agree to something, you offer them something for little to no personal effort.
take america, offer people a living for not working, and surprise 1/2 of america is willing to accept the offer.
take the eu., the BIS knew just adding the word union, to an already high % of countries with socialized labor would sway any public opinion, and politicians surely getting their vig, signed the eu, arrangement with little to no concerns of their countries sovereignty.
I have to disagree with the notion the ones that have the most to lose are being quite, ask the Ukrainians how quite the us, eu., nato are being about getting them into the eu, ask the families of the sailors on the Greek tanker if their being quite about getting a nudge to stay in the eu..
the eu., Britain, the us., and japan, are already been nwo'ed, and will take a very heavy price of the citizens to reverse our situation.
the same theory is being used more, and more, publicly, us., eu., japan, Britain's debt is to big to pay back, this is bs.
if people would use the krugman theory, we just owe this to ourselves we'd be fine, if we used it for debts concerning, and owed to the BIS.
Rothschild learned, how ever many years ago financing wars, and civil unrests everywhere was profitable, but the dirty secret is their finance both sides, and use the winners military, and other govt. law enforcement to collect their debt.
lets take the civil-war in america, both sides needed financial aide to continue war, both sides made financial arrangements, the war ended america united, (as well as it could've), did the north, (now america), pay the Rothschild type loans, did the south, (now america), but not considered the winner pay the Rothschild type loans, of course, through the use of American law-enforcement.
who won the civil-war, speaking civilly no one in america, who won financially, who ever loaned the money to continue the war, either side.
Rothschild, (the BIS), have been financing both sides wars for, how ever many 100's of years, and continue at a faster pace today, the BIS hit the mother load, with the word terrorism, are countries borrowing money through Rothschild, (bis), type loans to fight terrorism, yes, by the trillions, is the war on terrorism going to stop, no.
I see a showdown, Greece leaves the eu, they join the euro/asia federation, and the new president of Greece, using krugmans theory, we owe ourselves 322 billion dollars, (we all greeks, being the assets used to acquire the loans), are having a debt jubilee, will the eu have nato Ukrainianize Greece, another sovereign country?
the BIS has created so many possibilities, and in todays rush to the nwo, so many inhumane, and satinistic probabilities.
American middle class. That would be my guess.
Clearly there are different perspectives on the debt issue. In the UK we have this austerity drive by the govt to pay back the debts incurred by the banks which led to the snafu that was 2008. Basically what thuis amounts to is that the taxes paid by the public are being diverted to opay down this massive debt, instead of it going into our public infrastructure at all levels, with the consequence that services taxpayers have funded are dying in the street, whilst absolutely fuck all has been dome about the banksters who incurred this debt. The UK govt should have let the banks go to the wall, as happened in Icedland, but no, inaddition to selling off all our gold, the fuckwit at the herlm at that time, decided to 'rescue' the banks. So I say good luck to the Greeks: regardless of any offers originating with the ECB or whoever, the Greeks should reject all offers and go ahead and repudiate the debt. The Greeks forbears gave the world the idea of democracy, and if we're ever again going to have a semblance of that, the entire current ponzi system needs an axe to its roots and Greek intransigence is pretty much the only way to get that result.
As I have noted on several previous occasions, Greek default will not occur until the major private players have successfully transmogrified their Greek bonds into your Greek bonds, dear EU taxpayer. Looks like the process is pretty well complete and events can now play out as they were always going to do anyhow.
Who holds the outstanding debt tells you nothing except who Greece has the most leverage over. Who will provide Greece with future funding is who has leverage over Greece. Good luck with Portugal and Cyprus funding all of Greece's future deficits.
The bottom line is Greece doesn't need Portugal and Cyrpus. They need Germany. That is why Portugal and Cyprus don't say much, because they have no leverage here. Germany does.