How much money is at stake over Greece? | Business| Economy and finance news from a German perspective | DW | 10.06.2015
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How much money is at stake over Greece?

Greek Finance Minister Yanis Varoufakis offers little hope to German taxpayers who have contributed billions to Greece's bailout packages. DW examines the amount of money Germany stands to lose in the event of Grexit.

Varoufakis says the billions of euros that German taxpayers have so far contributed as part of Greece's bailout packages were "wasted" and "vanished into a black hole."

"You have given me your money, you have given me too much of your money. But it was wasted. It vanished into a black hole of unsustainable debt, it never really went to Greece, it went to the banks," the Greek Finance Minister said in an interview with German newspaper "Der Tagesspiegel."

The question, however, is how much will it cost German taxpayers. Germany's banks, for their part, have reduced their exposure to Greece almost entirely. In total, at the end of September 2014, they had some 23.5 billion euros ($28 billion) in credit exposure to the economically-troubled southern European country.

Out of this, banks' exposure amounted to about 4.6 billion euros, while that of companies and private people accounted for around 3.6 billion euros.

But the lion's share of German exposure was held by the state-owned development bank KfW, with lending to the Greek state totaling 15.2 billion euros. The KfW loans, which were issued as part of the first aid package for Greece, are fully guaranteed by Germany's federal government.

Banks less affected

German banks claim they are not vulnerable to any risks on account of their exposure to Greece. While Deutsche Bank said it held around 300 million euros in Greek corporate, bank and public debt, Commerzbank noted it had an exposure worth 400 million euros. According to a study conducted by US bank JP Morgan, German and French financial institutions are among those most exposed to Greece.

Nevertheless, experts argue "Grexit" - Greece's exit from the eurozone - is unlikely to cause any major problems for the financial institutions due to the small sums of money involved.

"The main risk involves contagion to other peripheral countries, particularly to Italy," writes analyst Kian Abouhossein. For Germany, there is a risk that the bailout funds it contributed are not repaid.

The Munich-based Ifo institute estimated at the end of March the maximum loss for Germany in the event of a Greek bankruptcy, and an exit from the currency union, to be about 87 billion euros. The projected sum includes the aforementioned KfW loans worth 15 billion euros.

No repayment in the near future

"The money will definitely not be repaid in the short term, and it might be repaid, at best, only in the long run," said Thomas Straubhaar, Professor of International Economic Relations at the University of Hamburg, talking to German radio station Deutschlandfunk in January.

One way or the other, Greece will not be able to repay its debts irrespective of whether the country remains in the eurozone or exits it, Straubhaar added, pointing out that the costs facing Germany were massive.

But although Germany will have to write down huge losses in absolute terms in the event of Grexit, the country will not be among the biggest losers.

Fellow eurozone countries like Slovenia, Malta, Spain, Italy and Estonia face losses amounting to some 2.8 to 3 percent of their respective economic output, according to Bloomberg. The analysts estimate this to be 2.37 percent of GDP in the case of Germany.