Greek 10Y bond prices (and stocks) are tumbling, pushing the yield well north of 10% once again - the highest in 15 months - as Bild reports Germany warning of bank runs and systemic financial system collapse [7]. Having noticed the weakness in financial assets that this caused, several European talking heads are out now trying to calm the waters with Germany's Michael Fuchs confirming "systemically [Greece] is not relevant anymore," but as one trader noted, for now, "investors seem wary of catching the falling knife."
Greek bonds are tumbling after Germany's reported comments...
[8]
As Bloomberg reports, they are starting to talk back some of last night's rhetoric...
Any political turmoil in Greece following this month’s election is no longer a threat to the wider stability of the euro area, Michael Fuchs, a senior lawmaker from Chancellor Angela Merkel’s party, said today.
“The situation in Europe has changed very much” since the height of the region’s debt crisis, Fuchs said today in an interview with Bloomberg Television. “Systemically they are not relevant anymore, the Greek people, so I’m not afraid for any other country.”
The French are also calming the waters [9]...
Pierre Moscovici, the European Commissioner for the Economy and Taxation, said in an interview in the World , that "we must let the Greeks make their choice " in the early parliamentary elections of January 25, and that " whatever their choice, it will be respected. It's not up to us to choose , to ostracize, the leader of a country of the European Union."
Mr. Moscovici, "we must make this election for what they are: an appointment you very meaningful democratic but not the possible trigger of a crisis " . It ensures that "the situation of uncertainty created by the elections causes movements very limited in scope and volume as regards the markets. Even more, in the case of capital."
In quantifying the problems, KeepTalkingGreece reports [10] Germany's FAZ notes [11] German economists estimate that...
A debt write off will cost Germany 40 billion, but a Grexit will cost 76 billion euros.
...
Economist Jens Boysen-Hogrefe is member of the Kiel Institute for the World Economy (IfW), an economics research center and think tank located in Northern Germany.
By a Greek haircut the German state budget would suffer greatly. Financial expert, Jens Boysen-Hogrefe estimates the potential losses for Germany, one of the main creditors of Athens, will be up to 40 billion euros, should Athens insists on a haircut, that would sink its debt ratio from current 175% to 90%.
“If Greece does not serves its debt anymore, the cost would be even higher, notes the FAZ, adding that another Institute for Economic Research, the Ifo Institute calculates the cost of a Grexit as much higher.
The Ifo Institute has added further costs that would be incurred if Greece not only goes for a haircut, but it exists the euro (“Grexit”).
“If Greece becomes insolvent and leaves the euro, the Federal Republic would expect a loss of up to 76 billion euros,” said economics professor Timo Wollmershäuser from the Ifo Institute for Economic Research.
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The 'negotiation' continues... or rather the game of chicken.
