June 6, 2011
As eurozone politicians scramble to bring Greek public finances back under control, the question of how much the European Central Bank will lose if they fail to avert a default has taken on greater importance.
In the past year, the ECB has bought €75bn ($110bn) in government bonds from the eurozone’s weakest economies and provided unlimited liquidity to their banks against collateral of declining quality. The suspicion in eurozone capitals, especially Berlin, is that ECB opposition to a debt restructuring is so vehement because the financial consequences for the euro’s monetary guardian would be substantial.
“Hefty losses for the ECB are no longer a remote risk,” warned Open Europe, a London-based think-tank, in a report on Monday.
It estimates the ECB has €444bn in exposures to Spain, Italy, Portugal and Ireland, as well as Greece. “There is a hidden – and potentially huge – cost of the eurozone crisis to taxpayers buried in the ECB’s books.”
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