This Is How Much Money Europe Will Lose On Greece

by Simone Foxman

Business Insider
May 22, 2012

While UBS analysts continue to believe that Greece will not leave the euro, it does face another disturbing reality: the Greek government will likely need a second debt restructuring to keep its debt under control.

Since public sector lending virtually replaced debts held by the private sector in Greece, this time around a default will target the European taxpayer. UBS enumerates the kind of losses he will see in a recent note:

The math is simple. Europeans have lent in various forms to Greece: via bilateral loans, and via EFSF more recently but also via the ECB’s SMP. The total exposure is currently €181.9Bn. A one-third haircut on this debt would thus mean a €60.6Bn loss of the European taxpayer, or 0.5% of Euro Area GDP. A 50% haircut on this debt would thus mean a €91.0Bn loss for the European taxpayer, or 0.7% of Euro Area GDP.

However, the effects of currency depreciation and liabilities in central Eurosystem banks would nearly quadruple these costs should Greece decide to leave the euro area.

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