Greece owes so much to so many that it has more leverage than you might think in this crisis

05/10/2012 5:54 pm EST


Jim Jubak

Founder and Editor,

So who do you think has the leverage here?

On the one hand, the EuroZone rescue fund withheld 1 billion euros of a scheduled 5.2 billion euro payment for Greece today. Klaus Regling, head of the European Financial Stability Fund said the remaining 1 billion euros would not be released until the troika inspectors had completed their next assessment of Greece’s financing.

And on the other hand, calculations by Bloomberg show that Greece owes 400 billion euros ($517 billion) to private bondholders, the International Monetary Fund, the European Central Bank, and other creditors.

What’s that saying? If you owe the bank 1 billion euros, you’re in trouble. If you owe the bank 400 billion euros, the bank is in trouble.

Among those currently holding the bag, according to Bloomberg:

The European Financial Stability Fund. Greece owns 80 billion euros in bailout funds.

The European Central Bank. The central bank bought 50 billion euros in Greek government bonds to push down yields. The Greek central bank has also kept printing euros as Greeks have started to hoard them. The total printing comes to roughly 18 billion euros. Oh, and Greek banks borrowed $73 billion euros from the central bank to fund their operations.

Other EuroZone central banks through the European Central Bank: The European Central Bank’s Target2 system, which keeps track of trade imbalances between the 17 national central banks that use the euro, shows that the Bank of Greece owes counterparty national central banks 104 billion euros.

Holders of Greek government debt. Even after the recent bond markdown Greece still has 143 billion euros of bills and bonds outstanding.

Private creditors. Nobody is quite sure how much private Greek debtors such as Greek banks and Greek companies owe to private creditors outside of Greece.

And none of this includes the political and reputational hit that creditors such as the European Central Bank would take if Greece carried through on threats to leave the EuroZone and those creditors themselves needed to raise cash. I don’t think the Bundesbank will be amused if the European Central Bank has to ask for it and other EuroZone central banks for money.
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