Greek Bailout – Who Is Really Getting Rescued?

posted by Nima

May 2, 2010 · Posted in Foreign Policy 

As events unravel in Europe, one might want to ask himself why nobody suggested that those who loaned money to Greece simply work out debt settlements on their own, and take responsibility for the financial risk they took with their loans.

Of course, in a world where individual accountability, free markets, and consistency are a such completely weird and laughable ideas to people, such a thing is unthinkable! :)

Who is it that ultimately benefits from this and all future Greek rescue packages? This post has some helpful information:

German financial institutions may have the third-largest exposure to Greece but are set to ride out the storm as long as the country’s fiscal crisis does not spread outside its borders, analysts said.

Lenders to public-sector borrowers — such as Commerzbank unit Eurohypo and Hypo Real Estate — as well as some landesbanks have billions of euros in exposure.

German creditors have a combined $43 billion outstanding with Greek borrowers, behind only French and Swiss lenders with $75 billion and $64 billion, respectively, data from the Bank for International Settlements (BIS) show.

Greece owes $302 billion to all foreign lenders, the most recent figures from the Bank of International Settlements (BIS) show — half the debt Wall Street investment bank Lehman Brothers had when it collapsed, which triggered massive writedowns as the value of banks’ assets plummeted.

Germans and other European citizens who will be footing this bill should be aware of this: Ultimately the rescue for Greece is nothing but another free ride for the banks who have already been bailed out on behalf of the hapless taxpayers.

The article also points out something else:

Greece’s economy is smaller than that in the southern German state of Bavaria and its banking system does not play a large international role. German exposure to Spain, in contrast, is six times bigger than lending to Greek borrowers.

“If the Spaniards get into trouble then the fallout from the Lehmann collapse will look like peanuts,” said one analyst who asked not to be named.

Aaah yes … the next disaster to look forward to :)

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