With Germany's exposure to Greece looming ( and the comical notions that Spain , Italy , Portugal would actually pony up anything , no wonder Keiser Schauble wants to take over !

http://globaleconomicanalysis.blogspot.com/2012/05/euro-area-official-sector-exposures-to.html

Thursday, May 17, 2012 11:08 AM

Euro area official sector exposures to Greece in excess of EUR 290bn Total; EUR 84bn Germany, EUR 63bn France, EUR 55bn Italy, EUR 37bn Spain

Via email I received an interesting set of facts from Barclays regarding banking exposures to Greece. Greece: Euro area official sector exposures in excess of EUR290bn

 Euro area official sector exposure

According to the French Finance Minister, F. Baroin, Greece's exit from the euro area "would cost France EUR50bn net, in addition to the securities held by banks and insurers in their portfolios." In the German press, it is reported that a Greek exit would cost approximately EUR80bn (EUR16bn from bilateral KfW loans, EUR20bn from the EFSF, EUR12bn from the SMP and EUR30bn from Target 2, based on December 2012 data, source: FAZ).

Here, we estimate the euro area's official sector exposure to Greece (bilateral loans, EFSF guarantees and Eurosystem) and show that the cost estimations mentioned in the press match the exposure if you consider a 20% recovery rate on Greek holdings. 20% is rather low, but not unrealistic given the outcome of the PSI and devaluation of the new Greek currency in the event of an exit. However, because of the accounting treatment of the different exposures and the presence of some financial buffers within the Eurosystem, the one-off, year-end shock on public accounts will be much smaller, probably around EUR100bn (1% of GDP).Euro area exposure via bilateral loans and EFSF guarantees:

As part of the first Greek bailout package (May 2010), EUR53bn has been disbursed by member states out of the EUR80bn committed over a three-year period. These disbursements are in the form of bilateral loans between Greece and the other member states. In February 2012, a second bailout package was signed, but this time funds would be transferred to Greece by the EFSF and the guarantees passed on to member states according to (adjusted) ECB capital key allocation. This second package has taken over the unused funds from the first package and no further bilateral loans have been made since then. To date, the EFSF has issued EUR73bn out of the EUR145bn committed by member states. Altogether, the euro area states currently have a total exposure of EUR126bn, representing 1.3% of GDP.

Euro area exposure via the Eurosystem's refinancing operations and interventions: 

In a Greek exit scenario, the Eurosystem faces losses stemming from either direct holdings of Greek bonds in the SMP portfolio1 or from Target 2 claims on the Greek central bank. Based on anecdotal evidence and central banks' balance sheet movements, we estimate that the Greek SMP exposure is approximately EUR35bn and that Target 2 claims on the Greek central bank are around EUR130bn.Indirect exposure via the IMF: 

Even though the IMF prides itself on never having made any losses on a programme, a Greek exit would certainly challenge this record. Potential losses would be redistributed to IMF members according to their quota. With 20% of the quota (link) the euro area would be exposed to a further EUR4.4bn.

Altogether, we estimate that the total official sector exposure to Greece is somewhere in excess of EUR290bn (see table below), representing 3.1% of (nominal) GDP. Because ECB capital keys do not exactly match GDP weights, the exposure in GDP terms varies from one country to the other, between 1.8% (Luxemburg, excluding programme countries) up to 4.5% (Malta, Estonia, see table and chart below).

Total Exposures to Greece

click on chart for sharper image

Looking for a reason for all the pressure on Greece to stay in the Eurozone? There it is. Pray tell where is Spain going to come up with 37 billion euros?


and....


http://globaleconomicanalysis.blogspot.com/2012/05/german-finance-minister-wolfgang.html

Thursday, May 17, 2012 3:20 PM

German Finance Minister Wolfgang Schäuble Tosses Hat Into Ring Seeking to Become "Grand Keiser for All Europe"

In the truth is stranger than fiction category, German Finance Minister Wolfgang Schäuble is calling for a political union "now" with a directly elected EU president (and of course he is the unstated logical candidate).

Translation: Schäuble is running for "Grand Keiser of All Europe".

Please consider Schäuble calls for closer EU integration

 Wolfgang Schäuble, Germany’s finance minister, called on Thursday for the EU to move decisively towards a political union in the face of the eurozone crisis, with a directly elected president in Brussels.

In a passionately pro-European speech delivered in Aachen, where he was awarded the annual Charlemagne prize, Mr Schäuble said the economic and financial crisis made it clear that closer European integration was needed.

“We must create a political union now,” he said. But he said that would not mean the creation of a European superstate, or a “United States of Europe”.

A debate was needed on precisely what responsibilities should be transferred to European level, on the principle that whatever tasks could best be done locally, regionally or nationally should not be changed.

One answer would be to give a face to European political union with a directly elected EU president in Brussels.

Mr Schäuble, who is regarded as the most pro-European member of the German government, said the EU urgently needed to improve its negotiating capacity on the world stage, with a more effective common foreign policy, and international treaties signed by all member states together.

“We must have the ambition to do more than simply protect the status quo,” he said.