Greece

French and German banking direct exposure to Greek crisis:

France and Germany in the line of fire
By Scheherazade Daneshkhu in Paris, James Wilson in Frankfurt and Patrick Jenkins in London
Published: February 10 2010

France and Germany, likely to have the biggest say in the politics of a bail-out for Greece, are also the countries whose financial institutions would be among the most exposed to a default.

Weighing the sovereign risk borne by banks is difficult but figures from the Bank for International Settlements – sometimes referred to as the central bank for the world’s central banks – show that European exposure to Greece is concentrated in French and Swiss banks, each with almost $79bn (€58bn, £51bn). German banks have about $43bn of exposure, about half through holding Greek debt to provide backing for issuance of so-called covered bonds.

Kian Abouhossein, banks analyst at JPMorgan, said it was “not unreasonable” to see banks in France, the UK and Italy as the most exposed to sovereign risk, though he said it was impossible to establish definitively which sovereign risk banks held.

“Some big banks might have €50bn of sovereign bonds, others might have €150bn, but there is no disclosure of which bonds they might be,” Mr Abouhossein said.

Some of the biggest French exposure comes through direct ownership of local banks in Greece. Crédit Agricole controls Emporiki, Greece’s fourth largest bank, with a €30bn ($41bn, £26bn) balance sheet; Société Générale, France’s second largest bank, owns Geniki, the Greek bank with a €5bn balance sheet.

In November, Agricole was forced to take a €485m hit on its investment in Emporiki through an impairment writedown. It is restructuring Emporiki to try to make the Greek lender profitable by the end of next year.

The rest of the French banks’ exposure is from investment banking and treasury operations, as the banks have large government bond trading businesses. For that reason Germany and Switzerland, with big investment banks such as Deutsche Bank, Credit Suisse and UBS, also show significant exposures to Greece in the BIS data.

German banks that issue covered bonds – known in the country as Pfandbrief – have about €14.5bn of exposure to Greece, of which €8bn is held in the ring-fenced “cover pools” that support the bonds and make them a very safe asset.

Preserving the Pfandbrief market’s reputation for stability is one reason why the near-meltdown in 2008 of Hypo Real Estate, a big German Pfandbrief issuer and buyer of sovereign debt, was so troubling for Berlin, which nationalised the bank.

Among Pfandbrief banks, HRE would be significantly exposed to a Greek default: its main subsidiary holds almost €2.1bn of Greek state bonds and a further €1.6bn of other Greek public sector debt. This is over 6 per cent of the bank’s €57bn cover pool for public-sector covered bonds.

According to a Credit Suisse report published on Wednesday, Greek banks own about €40bn of a total €300bn of Greek government debt. Of Greek bond issuance between 2005 and last year, about 30 per cent was allocated domestically, according to Credit Suisse, with borrowers in the UK and Ireland taking almost a quarter of issuance.

Jon Peace, analyst at Nomura, said a Greek government bond default was highly unlikely because of the severe consequences for financial stability, echoing the US subprime crisis. Instead, pressure was likely to mount on Greece to rectify its fiscal problems.

“We therefore see a greater risk for European banks which own Greek subsidiaries, such as Crédit Agricole, as these subsidiaries are likely to suffer from weak volume growth, weaker margins and higher credit costs.

“We see comparatively less risk for the investment banks such as BNP Paribas whose main exposure is through trading government debt who can more quickly manage their liquid exposures,” he said.

Credit Suisse said: “We believe that Spain is more of a concern than Greece, given ... significant over-leverage, a high current account deficit and overvalued housing.”

Copyright The Financial Times Limited 2010.

http://www.ft.com/cms/s/0/8038d17e-167d-11df-bf44-00144feab49a.html

 

If I am not mistaken Germany is not reluctant to approach the IMF. Greece on the other hand is...

Why?

Easy more austerity measures...

The Greeks are not ready for the real harsh measures.

The reason why I think the Europeans want the IMF in this deal is because they want the Americans to support this mess. I am thinking, and this is my extrapolation it was the Anglo-Saxon Goldmans that put the Euro and Greece into this mess and hence the IMF can come and bleed with the Europeans.

The interesting bit now is that Greece expects to get its money in a week or so. YET AGAIN the Greeks have no control of their situation. The Germans will drag their feet and they will not care. Hence the ones to bleed will be the IMF since they will have to jump first.

Germans are playing this quite nicely...

Will the Euro collapse? Not likely...

Christian

 

I side with Germany. Insane financial policy should not be the problem of other countries.

What is so hard about. "Sorry, you did not follow the agreement, you are history. Your euros are worthless and cannot be spent to buy goods/services from us. Good luck in the mud" Yes it is hard, but Greece cannot pay back these new loans either. It is prolonging the eventual Greek collapse by perhaps a year or so.

If I were a German/French citizen, I would not want to hear any other answer from my govt. "You are financing their welfare state because their people don't want to change and HOW IS THAT MY RESPONSIBILITY?"

 

i understand that there is local election in Germany in early May. so the Germans are stalling with backing up Greece (unpopular in with German electorate) until the election is over.

 

Dude I am completely on your side. I looked at the 2010 budget and 44% of the Greek budget comes from borrowings. This is called a bankrupt state! Greece needs to collapse...

 

You do not know what you are talking about because you know zero about international economics and politics.

Germany and France have been screwing the Greek economy all along and Greeks have been on austerity measures since 1996. The Germans used political influence and corrupted public servants in Greece through their front Siemens in order to get all projects there. They sold submarines to Greece that tip over and have been all along controlling the main national airport and recently bought the largest telecom OTE (NYSE). They have instituted policies to prevent agricultural exports from Greece by paying Greek farmers not to grow anything through corrupted political decisions. Their only purpose was to turn Greece into a weak link, buy everything there for cheap and also find an excuse to get out of the Euro.

You know nothing to the extent that the Germans were forced into the Euro in order to get approval for reunification.

http://en.wikipedia.org/wiki/German_reunification#British_and_French_opposition

The Germans were allowed to freshly print about 650 Billion, yes billion you read correctly, DM to finance reunification and now they refuse help of 10 Billion to Greece, a country they have milked all along with the French who got all aluminum production of Greece and sold weapons there in high numbers.

You know nothing to the extent that Germans took the Greek gold during WWII as a load they never repaid.

All you can do is praising Germans and call other nations lazy. This is not so. I have friends who lost their parents, sisters and brothers during the Holocaust and it was Germans who committed those atrocities.

Germany has a surplus it does not want to share with other countries. They forget though that the surplus was created by milking other countries through over competition. This is not a fair game; I would say it is a sick game, as sick as WW II.

 

Investors betting against Greece now will “lose their shirts,” Papaconstantinou said yesterday.

reminds me of CEO statements how "all shorts leaning against his company will get badly burnt" just before the company goes under.

 

I would agree with you, but something could be up. Don't forget, the IMF met this weekend. Greece and SDRs were likely major topics.

 

Yeah you are right... I know nothing about this. Absolutely zip zilch zero... However, I happen to be a German citizen and have been living in Europe for the past 15 years!

So let me pick apart your arguments!

First Germany HAD to do dick squat! Kohl went along because Kohl was a product of the second world war. He did many things that made Germany humble and he let himself be pushed around. And the rest of the world went along allowing reunification because there is nothing that they could have done if push came to shove. So stop getting those skeletons out of the closet.

Germany screwing over Greece? Yeah whatever... Greece is screwing itself over! Greece is not realizing that it is living beyond its means. And they are grabbing at anything to retaliate. They are not looking at their own problems. They are saying it is the fault of other people.

About the German's taking Greek gold? Hey guess what World War 2 was a hard time, but Germany paid Greece...

http://calvininjax.wordpress.com/20...manys-nazi-past-in-row-over-financial-crisis/

Germany paid 6 billion Euros to the Greek government. And what about all of those years where Greece was getting money year after year from the EU solidarity fund?

About the Germans printing 650 billion! Wow, dude, let's say for moment that your argument is right. Want to know something, it was to rebuild East Germany. You know the place that was completely decimated due to communism. And want to know how the Germans paid for it? Each and every German taxpayer has a 5% reunification tax (used to be 7.5%) that they have to pay each and every year! That means regardless of your taxation you have to add another 5% on top of it to pay for the reunification. Are the Greeks introducing a solidarity tax to get them out of this tight bind?

Why are you bringing in people lost from World War 2? Want to know something! My grandfather was sent to Siberia for 5 years because he did not conform to the communist ideal. My family had to live through hyper-inflation and having NOTHING, NADA, ZIP, ZILCH... My father told me right after the war he had to eat rice for 3 weeks! Why? Because there was nothing else. Germany went through quite a bit of hardship! Additionally none of my family were Nazis!

Finally the fact that Germany has a surplus is because they are industrious! It is that simple! If Greece were to concentrate more on being industrious then maybe things would not be so bad. Here is a suggestion, why is Greece not one of the biggest organic olive oil producer? It is Spain that produces the most olive oil, even though Greeks are the biggest olive oil consumers per capita. This is an example of the failure of Greece's economic policy. Now Greece is playing catch up with Italy, Spain and Tunisia...

I never called Greece or Greeks lazy! I looked back at my comments and did not find that word. I said Greece and Greeks are living beyond their means and incapable of cutting back. All of your arguments and rants confirms what I have been thinking for quite a while. Greece is unable or unwilling to cut back. As such the only solution is to let Greece declare bankruptcy and introduce their own currency and let them figure things out for themselves.