Greece Played Germany Like A Violin; Horrified Syriza Demands 'Icelandic' Default

A time-based analysis of eurozone taxpayer liabilities shows the Greek game-masters played German creditors like a violin. 

What got me thinking about this in detail was a recent statement by Financial Times writer Wolfgang Münchau that France and Germany stand to forfeit €160 billion if Greece defaults.

On January 22, I had French exposure at €55 billion and German exposure at €73 billion, a total of €128 billion.

See Revised Greek Default Scenario: Liabilities Shifted to German and French Taxpayers; Bluff of the Day Revisited 

The difference between our numbers is almost all due to a huge jump in Target2 imbalances. Let's take a look.

Partial Table of Liabilities January 22 

IESEG Bilateral loans Guarantees on the borrowings of EFSF to fund its loans Implicit share of TARGET2 claims of the Eurosystem Implicit share in the SMP holdings of bonds by the Eurosystem Total
France 11.389 31.02 8.651 4.148 55.209
Germany 15.165 41.308 10.981 5.266 72.72
Italy 10.008 27.259 7.511 3.602 48.380
Spain 6.65 18.113 5.394 2.587 32.744
Total 52.9 141.8 41.709 20 256.409


The above table derived from Exposure of European Countries to Greece by Dr. Eric Dor, IESEG School of management.

The total does not add up because I included only France, Germany, Italy, and Spain. 

Partial Table of Liabilities March 4 
 

IESEG Bilateral loans Guarantees on the borrowings of EFSF to fund its loans Implicit share of TARGET2 claims of the Eurosystem Implicit share in the SMP holdings of bonds by the Eurosystem Total
France 11.389 31.02 15.308 5.439 63.156
Germany 15.165 41.308 19.430 6.903 82.806
Italy 10.008 27.259 13.291 4.722 55.280
Spain 6.65 18.112 9.545 3.391 37.698
Total 52.9 141.8 75.994 27 297.694


On March 4, the taxpayer liability of France and Germany increased to approximately €145 billion. The liability of the "big four" jumped from €209 billion to €239 billion.

Target2 Now

Yesterday, reader Lars from Norway pinged me with these thoughts.

 Hello Mish 

Draghi revealed today that the current Intra-Eurosystem liabilities of the Bank of Greece is €118 billion. It is unclear if this is Target2 plus banknotes. If it is, then the increase since end April is only €3 billion. That's not much, but the €118 billion represent 66% of Greek GDP. It's also a little more than 2 times ECBs equity. 

The Bank of Greece has not published the end of May balance sheet yet. They normally do that mid-month. 

The ECB will continue to extend liquidity to Greece as long as collateral is provided. I suppose that collateral will collapse in value if Greece defaults.

Draghi is either very brave or very stupid. Then again, he says his approach is rules based, so he is on auto pilot. 

The Greek drama will continue as long as liquidity is provided by ECB to Greece. 

Regards Lars
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