Germany Begins Quantifying The Cost Of A Greek Exit (And Discovers Contingent Liabilities Are All Too Real)

Tyler Durden's picture

First came the rhetorical jawboning, where following announcements by Fitch, European politicians, and finally Germany's finance minister, the scene was set to prepare the general public that despite protests to the contrary, a Greek exit from the euro would not really be quite the apocalypse imagined. Now comes the actual quantification part, whereby in addition to adding numbers and determining what the further sunk costs to a Greek bailout will be (hint: much, much greater than anyone can conceive), Germany has finally understood what we have been warning for over a year: that contingent liabilities become very real liabilities when a threshold event forces the transition from "off balance sheet" to on, and the piper has to be paid. According to an analysis released hours ago in Wirtschafts Woche, Germany "would only absorb losses of 76.6 billion euros in Germany. This amount results from bilateral aid loans, the liability of Germany's share in credit rescue fund EFSF, Germany's share of losses of the European Central Bank (ECB) and the German share of liability to the credit support of the International Monetary Fund (IMF)."

The quantification continues (google translated):

15.1 billion euros from Germany alone would have been awarded the bilateral loan write off, which was adopted in May 2010 part of the first rescue package are. 20 billion euros stuck to Germany as a liability amount from the second bailout by the IMF and EFSF. Would be added to the percentage loss of 12.1 billion euros of Greek government bonds, Federal Bank, which bought the ECB and these would have to write off a national bankruptcy in Greece. On further € 28.1 billion would amount to the federal share of the losses in the so-called target of the ECB claims against Greece.

A far bigger issue, however, is that once Greece bails, the contagion effect would begin: first by Fitch downgrading all European countries as it warned yesterday, then more and more countries becoming ineligible for EFSF/ESM participation, as we warned last July when we predicted this entire chain of events in "The Fatal Flaw In Europe's Second "Bazooka" Bailout: 82 Million Soon To Be Very Angry Germans, Or How Euro Bailout #2 Could Cost Up To 56% Of German GDP" when we explained how in a daisy chain collapse of European countries which could only be sustained, paradoxically, by an exponential expansion in the EFSF, could result in Germany easily footing 32% of its GDP (and in reality up to 56%) in "contingent liabilities":

And the biggest concern, one which WiWo only briefly touches upon, is that once the EMU exits begin, and the Eurosystem collapses, all those receivables due to the Bundesbank become null and void, or at best payable in drachma, peseta, escudo, and lira. In other words: completely worthless. As a reminder, at last check the total amount of TARGET2 obligations had soared to a record 25% of German GDP.

So while we appreciate Germany's first attempt at quantifying the cost of the Greek exit, the truth is that the number proposed is woefully inadequate. And the roughly 50% of German GDP already "sunk" will only get bigger and bigger, until finally there is no choice for Germany but to pull the plug.

What, however is most important, is that after months and years of even denying this potential outcome as a possibility, Germany too has finally discovered that when it comes to numbers, no amount of rhetoric can change the final outcome.

That the quantification of costs has finally started is critical. And yes, we are confident that the true final number, one that Zero Hedge predicted with precision last July, will soon be derived even by the most hardened pro-Euro German press.

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Harvey Lee Oswald's picture

Don't worry, Germany says everything will be alright. Now go on and be a good sheeple just BTFD.

C'mon now repeat after me, BTFD, BTFD, BTFD.

TheFourthStooge-ing's picture

Damn you, arithmetic! Why do you curse us so?!


Colombian Gringo's picture

Extend and Pretend, Eurostyle, Bitchez!

Cdad's picture

In relation to the costs associated with Greece leaving the Union, how much has Germany already set aside within its banking system for just such an event?  I ask because I forget the number now, but something tells might be, oh, I don't know...76 billion Euros, give or take.

NewThor's picture

There is no Euro.

There is no Dollar.

All we have is us.

Manthong's picture

I don’t understand..

Are the Greeks working for the Germans or are the Germans working for the Greeks?

The trend is your friend's picture

Where is christine lagarade pithching the "all in" and "no exit for anyone" mantra 

Harlequin001's picture

The instant this happens and any kind of post collapse stability returns the US is soooo fucking dead.

No one is going to want dollars, no one, not even the US. There will be far too many for them to cope with. This is no different at all than the run up to Weimar.

Me, I got gold, and after the recent plunge, a lot more silver...

Thanks Ben...

Rynak's picture

Both are working for for banksters. Heck, there isn't even a bailout of greece, only a bailout of creditors. The nationality bullshit is just spread to divide and conquer "please fight among yourself and put your head in the sand, while we pillage the entire continent (and on a longer term the planet) dry.

Harlequin001's picture

but surely you must have realised by now that this is a once in a multi-generational opportunity to benefit yourself by buying gold well ahead of the game...

There is nothing you can do about what follows, so why not?

Peter Pan's picture

Truer words have not been spoken today New Thor...

brettd's picture

Got friends?

They'll be very valuable in the coming seasons.

smlbizman's picture

wasn't it already established that it was...."cheaper to keep her......and thats why they tried to salvage..

Harlequin001's picture

actually CDad I suspect it's nearer to zero...

Think for yourself's picture

Sure, I'll BTFD. Just not the one you seem to be talking about.

Romford_Dave's picture

Maybe they mean once Germany leaves Euroland it'll be alright?

Trillions of Drachma/Peseta/Lira/Franc und Euros the German people are on the hook for will probably equate to about 3 new Bundesbank DMarks.

Buck Johnson's picture

Reminds me of the Science Fiction story called The Cold Equations.  No matter what they wanted and what they tried the numbers for survival still came to the same thing.  Germany was foolish enough to continue to back this mess up and now it's about to cost them their economy. 

veyron's picture

I always envisioned european 'chicken' as two cars heading toward each other on the autobahn ...

tenpanhandle's picture

I remember, many many years ago, a headline in the news paper about two Italians (in Italy) both had their heads out the window, yelling and cursing at other drivers when they literally had a head-on collision, both their heads colliding with a pop.  It was hard to feel sorry for them.

That has always been my idea of "European Chicken".  I guess they were blinded by their own saliva as they spewed and  sputtered words condemning other drivers while they failed to watch their own driving.

Rainman's picture

Hilarious...the Germans want to believe there is only one bad apple in the barrel and will plan accordingly. Like Scarlett O'hara they'll worry about the rest of the mess tomorrow. 

Harbanger's picture

I can't think about that right now. If I do, I'll go crazy. I'll think about that tomorrow.

Sudden Debt's picture

The Germans know all to well that all the Greek companies have their debt in Germany, belgium and france and once they go to the drachme all their debt much be repayd in drachmes.
They'll start at 1 drachme per euro but it will drop like a stone and than their debt will also devalue by about 60%.
the kicker is that there are a lot of companies who moved their corporate offices to greece in 2009 when it became clear they where going to default!! So they could cut their debt for cheap!

But banks are going to bleed bigtime. So not only because of the greece as a country but the companies who played the game.

Rynak's picture

What you didn't mention, is that wages will drop as well.... that sure will temporarily boost "exports" versus imports..... but well, it is a bit like going from the one total idiocy, into the opposite total idiocy.

Striving for selfsustainability.... is that so utopian?

Or is it that the import vs. export dichotomy is only pushed so hard popularily, so that their believers stay stuck in an endless loop of fail, from which sharks can profit?

It's almost like going hunting.... except of, the victim you shoot, isn't outrightly killed, but just being "marked" for pillage in "n turns gametime".

Doesn't anyone wonder what it could mean, that the PIIGS as well as the "core" seems fucked, even though they have pushers/exporters as well as junkies/importers among them?

How the fucking hell does anyone think this "game" works anyways: "Take this money from me and buy my wares, and i'll become rich" vs. "Destroy your ability of self-sustainment, and you'll get freebies for a limited time.... at which the creditor will own you".... how does one even put a positive "spin" on this, without outrightly ignoring all of this, and inventing an alternative illusionary worldview in which pigs really fly? Oh wait... nevermind.

BigDuke6's picture

Rocco Ravishes Athens.

Greek style with a german twist.

Peter Pan's picture

"The Germans want us to believe there is only one bad apple in the barrel."

The apples are's the barrel that's the problem.

Zero Govt's picture

how about both the apples and the barrel being rotten

in context i think it's called 'socialism'

Peter Pan's picture

The strange thing is that they want to break the big banks up because of the risk of general collapse that they can cause if they fail, yet the system is so fragile and interconnected that a tiny nation like Greece is creating the fear of Armagedon. The lesson is that both big and small can be lethal.

AssFire's picture

Go Greece!

Be the domino that gets this collapse started.

There are so many IOU's of fiat money in that card game; no one can turn in a marker or the whole game ends.

Sudden Debt's picture

Lesson 1 in marketing to get a trend started:

1. There needs to be somebody, a inventor, who starts something.
2. The inventor rarely gets the trend started but he needs to do 1 thing. Find a fool who will follow him and who's convincing enough to make others adopt his believe.
3. And the adopters will spread the trend.

Greece is just the inventor of leaving the euro. There needs to be one more follower and after that one adopter and than you've got a trend and than europe is over.

So first greece, than spain and he who follows spain will destroy europe. My guess will be holland who will run for the hills and do the smart thing to do.

newworldorder's picture

The FED has just finished auditioning for the part of "rich uncle from mars who brings money" on the new Euro Save movie. Rumor has it that they definately will get the part.

carbonmutant's picture

Well, we're getting down to the real reasons Merkel didn't want Greece to make a run for the border...

AssFire's picture

My greatest hope is the "United" States (united by threat of war if you try to leave the union) will have as bad a collapse as the coming EU collapse. Only a complete failure of the dollar can break the Feds grip on power and return rights the states. Just another year or two of current conditions and some states will be openly bailing out the progressive states. This is already occuring as the government continues to reward states with higher than usual unemployment with a never ending stream of unemployment benefits.

Harbanger's picture

No fed buying of debt. No bailout for the states.   Allow the states to renegotiate debts and union contracts like any other bankruptcy.

Bring the Gold's picture

Progressive eh? The coastal states have been providing the Lion's share of tax revenue for decades and most of that was sunk into the black hole of Southern states. No doubt California is a black hole of statism and taxes, but for many decades it was a source of transfer of payments to conservative states in the South. It's all a tad more complex than progressive vs conservative. Really whats more worrying to me is dogmatists on both sides of the specturm vs realists left, right, center and off the map. Those who want to tell me how to live - and back that up with force of law - worry me regarless of the party affiliation. Especially when you consider that the moralists of both parties seem to be completely blind to the annihilation of rights economic and civil within our nation. It's not a left vs right thing. It's a clear thinking vs easily confused/enraged zealot thing.

Joe The Plumber's picture

More rage and more extremism please. Collapse the fucker already

Harbanger's picture

What are you talking about it's not Progressive vs Conservative? keynesian economics was the Progressive's challenge to Classical economics.   The entire fiat ponzi is a century old Progressive scam.  btw- Your name "bring the gold" sounds pretty darn conservative.

Lednbrass's picture

What a liar.

Enraged zealot indeed, what you say simply is not reality.  Your specious claim is based on total federal expenditures and there are some major factors at work you are ignoring for the sake of being a self righteous lying dickhead. The handout states arent in the South, and you are relying on some flawed bullshit studies with questionable sourcing. You are either gulliable, stupid, or a liar so in the interests of reality here is the real world.

Here is Federal expenditure by state for 2010, this was the final year for the CFF report as the Obama administration discontinued it-

Table 13 show expenditures by state, overall then broken down into retirement, procurement, grants, salaries, and other.

Per capita Federal expenditure by category is shown in table 14. Who are the top 5 recipients per capita?

1) Alaska 2) Virginia 3)Maryland 4) Connecticut 5) Hawaii

Welp, looks like so far youre a lying asshole. Look how low the South is on the grants list.

What money do they take in? 2010 IRS figures are here,,id=206488,00.html

OK, so when we compare money paid  vs. money received, who gets the most money?

1) Virginia- 78,128,254,000 2) Florida- 75,339,258,000 3)California- 60,455,894,000 4) Maryland- 48,588,785,000 5) Pennsylvania- 44,075,246,000

The only net donors are-

1) New Jersey- 37,952,547,000 2)Minnesota- 23,634,129,000 3)Delaware-7,251,877,000 4) Illinois-1,071,060,000 5)Ohio- 34,026,000

Virginia alone takes up the entire surplus because the vast bloated federal bureaucracy took over the northern part of the state.

Whaddaya know, once again youre a lying asshole. So far your "South takes money from elsewhere" theory is total bullshit.

Must be per capita spent vs, recieved, right? Surely you cant be completely fucking clueless.

1) New Mexico- 3.67 2) West Virginia- 3.58 3) Mississppi- 3.48 4) DC- 3.37  5) Hawaii- 3.32

Only one state from the South there, looks like you really are a goddamn moron.

The main reason the South does get anything from Uncle Sugar  is because of all the damned northern retirees who decide to pollute them after a life spent ruining their own states and a very disproportionate military presence.  Add in the fact that manufacturing is also moving to the South from the overregulated New England and Left Coast states and thats the majority of any Federal money that goes there.

Face it, you read a badly sourced "study" and swallowed it whole because youre an effete leftist urban asshole and are too stupid and too lazy to actually check into anything for yourself. It painted a totally fake picture of northern leftist states funding he poor benghted South and that fit into what you want to think so you just bought into it because you are just too damn dumb to think critically.

Now fuck off you idiot herd beast, go chew your cud.

AssFire's picture

Nice rant, I'm gonna keep my eye on you. California's debt just hit 16 billion- that leftest probably lives in Ca. Leftists always find someone elese to blame and always find a card to play so that they can't be critcized.

DanDaley's picture

California's unfunded liabilities: Tens of trillions!  "Spending other people's money just feels soooo good" (Jerry Brown overheard mumbling at a zen meditation).

DanDaley's picture

It's not a "left - right" argument, it's a "small government vs big government" battle.  Controlling (big) governments murdered 100 million + in the 20th C., but that's probably peanuts compared to what's coming.

GMadScientist's picture

Which states, other than say North Dakota, would be "bailing" anyone?

Joe The Plumber's picture

Actually the North sucked capital out of the south for about 130 years due to the tariff of 1831. British manufactured goods were kept out and northern manufacturing was subsidized. Thats why we be po and ignernt in the south

Reparations bitchez. You yanks owe it to us

smb12321's picture

You are deeply underestimating the creativity of the powers that wannabe to obfuscate, delay, cover, change and forestall the inevitable.  Even the most rabid supporters of Social Security and Medicare acknowledge their eventual bankruptcy but then quickly switch the subject to starving Grandmas.

What separates us from the EU is our policy of money flow from rich to poor states. Until recently, it was the Northeast, Michigan, Ohio , CA (blue states) that funded the South.   Now it is the other way around.

CA and IL will first try to shame, then scare Congress.  There is nothing you or I can do if DC decides to bail them out.  The template exists through TBTF.

brettd's picture

Isn't that almost guaranteed, with the Fed backstopping various European bank/entitites?  Bring the whole thing down in one fell swoop.  Otherwise, the USA would, in spite of its insanity, be back as king of the hill.  That will be unseemly.

ghenny's picture

Thanks God I live in Michigan then because if your scenario is correct the only thing that will matter is enough food and water.  We have plenty of both and our state debt is pretty modest too despite all the bad press about Detroit.

Nussi34's picture

Current guarantees per German taxpayer depending on income (only GIPS default, excl. Italy, France or Belgium):

It is about one annual gross salary.

I assume that when it is time to pay Germany will just do what Greece is doing and say "yes we have a contract, but we will not pay"-

ISEEIT's picture

Does this mean that rehypothecation is a real word?