We know who is most exposed to Greek debt. That’s France – who are massively, suicidally exposed, followed by Germany. One if not two French banks would be unlikely to survive if Greece defaulted. What would happen to France itself is anyone’s guess. But it would not be pretty. France would have to push for a very generous re-structuring.
But who is exposed to the debt of Bulgaria, Romaniaand Hungary? Well thanks Kerrisdale Capital for compiling the amounts from the always indigestable BIS raw data.
It turns out Austria is almost as exposed to Romania’s debt as Germany is to Greece’s. Austria is exposed to about €42 Billion. Next most exposed to Romania is… Greece at €25 Billion. Does anyone think Greece could stand to lose even a fraction of that? Or do you think a default by Romania would tip Greece over?
Next on the Romanian default list is Italy. A mere €13 Billion. But again that’s €13 billion the Italian’s don’t have. So I think it fair to say if Romania defaulted we would see Greece implode and Italy be rushed into hiding from its creditors. Greece’s demise would then start the chain reaction up to France and Germany as well as finish Italy off.
What about Bulgaria then? Well the good news is she doesn’t owe Germany, France or Austria a thing. The not so good news is those most exposed to her dafault are Greece (€16 Billion) and Italy (€9 Billion). You really couldn’t make it up could you.
But we’re not done yet. What about Hungary – of the dying Florint, unsaleable debt and ‘we may well default’ fame?
Well Hungary apaprently was as attractive an investment as Rumania was, for those ever so clever Austrian and German Bankers. Can’t blame them. It’s all former Austro-Hungarian Empire solidarity. But the result is ugly for all involved. Austria is almost as exposed to Hungary as it is to Greece – about €38 Billion. Germany €32 Billion. Next in line, just to keep her No. 1 comedy status unchallenged, is Italy! Italy is owed more by Hungary than anyone else. A kind of Mussolini, trying to compete with the German’s, knd of move. Italy’s exposure to Hungary’s debt weighs in at a whopping and Bourse busting €25 Billion. Hungary goes – bye bye Italy.
Belgium creeps in there with Hungary debt being owed about €18 Billion.
For me this makes sense of one of the more engimatic headlines to come through on Reuters today- “Italy says interest payments on debt subject to great uncertainty”. What to make of this? Well a little investigation leads to the Italian government passing a law allowing the Italian government to ‘regulate’ and monitor’ the rating’s agencies who rate bank and government debt. A comedic attempt to shout down those who have might have nasty things to say about the quality of Italy’s debt and financial position.
That the rating’s agencies have consistently rated dog poo as caviar for the last half a decade is neither here nor there. For me, Italy still rules when it comes to financial slap-stick.
But none of this had detered the markets. Oh no.
Facts and figures are apparently for amateurs.
Trichet, head of the ECB came out today and said unlimited support for any European nation that needed it – hello yes that’s you Greece, Spain, Portugal and now Austria (and indirectly Hungary, Bugaria and Rumania -= this list is getting long isn’t it?) – the markets rallied.