Greek exit could cost euro zone 100s of billions of euros
FRANKFURT (Reuters) A Greek exit from the euro zone could expose the Canada Goose Parka European Central Bank and the currency bloc it seeks to protect to hundreds of billions of euros in losses, landing canada goose clearance sale Germany and its partners with a crippling bill.
canada goose coats A Greek departure would take Europe into uncharted legal waters. The size of the burden other euro zone states could bear gives them a powerful incentive to keep Greece in the currency club.
Canada Goose online With most of Greek private creditors having taken heavy writedowns as part of the country second, 130 billion euros bailout, it is estimated that the ECB, International Monetary Fund and euro zone nations hold approaching 200 billion of its debt.
the event of an exit, they (Greece) will default. And the loss given default will probably be very high, high enough to eliminate the ECB capital, said Andrew Bosomworth, senior portfolio manager at asset manager Pimco.
might need recapitalisation from governments, who are not exactly in the best position to Canada Goose sale provide additional capital.
canada goose black friday sale Those are not the only losses the ECB and its national shareholders might face as is explained in detail below.
Even once Greece had https://www.canadagoosesale.info left the currency club, the costs to the rest of the euro zone would continue to mount as it would probably be compelled to avert a complete Greek collapse and wider contagion.
Canada Goose Jackets ECB intervention would be necessary to stabilize the system, along with intervention from Germany, the European Stability Mechanism (ESM), its predecessor the European Financial Stability Facility (EFSF) and the IMF, potentially costing hundreds of billions of euros, canada goose store said Georgios canada goose clearance Tsapouris, investment strategist at Coutts.
canada goose The ECB, which has its own paid in capital of 6.4 billion euros, is essentially a joint venture between the 17 euro zone national central banks (NCBs). Combined, the uk canada goose outlet Eurosystem of euro zone central banks has capital and reserves of 86 billion euros.
cheap Canada Goose The national central banks would divide up any losses between Canada Goose Outlet them according to the key the ECB measure of countries stakes in its financing based on economic size and population. Germany would bear canada goose uk shop the biggest loss, some 27 percent of the total.
Canada Goose Parka France would take a big hit too.
A Greek exit from the euro zone could cost the French taxpayer up to 66.4 billion euros and saddle the country banking canada goose uk black friday system with 20 billion euros in lost loans, according to a study published on Tuesday by the IESEG School of Management in Lille.
canadian goose jacket Smaller countries with less robust national central banks than the German Bundesbank would likely be still harder hit in relative terms.
canada goose clearance sale ECB and some of the NCBs with little loss absorbing capital and reserves relative to their share of how a loss would be allocated across the Canada Goose online Eurosystem would potentially see their capital and revaluation reserves written off, Bosomworth said.
However, with fresh Greek elections called for June 17 and an anti bailout leftist party ahead in the polls, some within the EU corridors buy canada goose jacket of power wonder whether the show is worth keeping on the road.
Canada Goose Outlet going to hurt, absolutely. But is it going to be lethal? one EU diplomat said. have two bad choices, but one is worse than the other.
Canada Goose sale TRIPLE WHAMMY The ECB and national central banks are exposed to Greece in three main canada goose ways: canadian goose jacket via Greek sovereign bonds the ECB holds, via Greek collateral they hold in return for ECB loans and via Greece liabilities for transactions over the euro zone TARGET2 payments system.
buy canada goose jacket The ECB has spent about 38 billion euros on Greek government debt with a face value of about 50 billion canada goose black friday sale euros.
buy canada goose jacket cheap Under cheap Canada Goose a scenario described in German weekly Canada Goose Online Der Spiegel, the euro zone EFSF bailout fund could be used in canada goose factory sale the event of a Greek default to continue funding Greece debt obligations to the ECB.
canada goose deals However, this would canada goose coats on sale eat into the resources uk canada goose of the eroding its capacity to help other euro zone states which might well need to be protected if a Greek exit sparked contagion.
canada goose coats on sale An alternative scenario could see the national central banks turning to their governments to recapitalise the ECB. But going cap in hand to politicians for money they are desperately short of risks undermining the ECB independence.
canada goose clearance ECB loans to Greek banks are another way the central bank is exposed but in this case, although the ECB conducts canada goose uk outlet these medium and long term lending operations (MROs and LTROs), the funds are distributed via cheap canada goose uk the national central banks and carried on their balance sheets.
A Bank of Greece financial statement on canada goose coats its website showed that as of January 31 it had lent out some 15 billion euros in MROs and 58 billion euros in LTROs a total of 73 billion.
It was holding 143 billion euros in assets eligible as collateral for euro zone monetary policy operations.
Berenberg Bank economist Christian Schulz said that in the event of a Greek exit these loans and most of the collateral may be converted into a new Greek currency.
ECB/Eurosystem Canada Goose Coats On Sale would not bear the risk anymore, he added, noting that the Bank of Greece would instead be left with the likely devalued loans and collateral.
TARGET RISK But any funds Greek canada goose coats banks had taken using ECB loan operations that had subsequently found their way out of Greece could pose a problem. These would be added to the Bank Canada Goose Jackets of Greece liabilities buy canada goose jacket cheap under the TARGET2 payments system.
The Bank of Greece and other peripheral euro zone countries have built up liabilities within the euro zone cross border payment system, TARGET2, due to a net outflow of payments to other countries in the bloc, a trend exacerbated by the debt crisis.
The Bank of Greece financial statement showed that as of January it was carrying TARGET2 liabilities of 107 billion euros a sum that has likely remained around that level since and which represents a big potential problem for the other euro zone central banks.