Thursday, May 17, 2012

Eurozone Governments Heavily Exposed To Grexit

Total Exposures to Greece
Looking for a reason for all the pressure on Greece to stay in the Eurozone?
Read it at Mish's Global Economic Trend Analysis
Euro area official sector exposures to Greece in excess of EUR 290bn Total; EUR 84bn Germany, EUR 63bn France, EUR 55bn Italy, EUR 37bn Spain
By Mike Mish Shedlock

Last night I was engaged in a discussion about the potential fallout from Greece leaving the Eurozone. My opinion is that Greece will leave the currency (EMU) but remain in the EU. The counterargument was that the cost of allowing Greece to exit and repudiate its debts is too great, hence politicians will find a way to avoid that outcome. Well, here is a handy chart showing the exposure of other Euro nations to Greece. Without even accounting for other indirect costs, this is a meaningful sum. However, as I said earlier in Bank Runs Begin: Can Europe Put the Genie Back in the Bottle?:
Despite the enormous costs to a disorderly dissolution, I remain unconvinced that politicians will overcome their differences in some type of “grand bargain.”
Only time will tell...

1 comment:

  1. Euro Zone does not have to worry about this. United States will take Greece's place in the Euro Zone, if Greece separates from Euro Zone.

    By: exchange rates