Friday, November 26, 2010

Who loses if Greece, Ireland, Portugal or Spain go bankrupt?

I just found this macroeconomic report of the Bank of International Settlements:

Among other macroeconomic data, it details the exposure by country (page 16) to the loans of the four Eurozone countries targeted for "revision" by the media and some authorities: Greece, Ireland, Portugal and Spain.

It is an interesting data to review. Let's see:


The main state exposed to a possible Greek bankruptcy is France, with more tha 1/3 of total exposure, followed by Germany, the USA and the broad category of other EU countries (Benelux and/or Nordic countries surely). Spain, Italy, the UK and the rest of the world have rather low exposures.


Roughly half the Irish exposure is split between the UK and Germany. The USA, France and the other EU group are also quite exposed. The overall exposure to an Irish bankruptcy is almost three times larger than in the cases Greece and Portugal, in spite of Ireland being a country almost three times smaller than these two.

It is clear that Ireland has been lent to quite liberally in the recent past.


The most exposed country is Spain, what makes Portugal the first real case of possible "contagion" senso stricto (there's a lot of chatter about "contagion" and "domino effect" but actually this is the only case where a the main creditor is also among the "red tagged" countries). Spain holds about 1/3 of Portuguese exposure, followed at a good distance by Germany, France, the USA and the UK.


Spain is much larger than any of the others by all measures (4 times larger than Portugal or Greece and ten times Ireland, by population). It also has the largest foreign exposure, which is however only somewhat larger than that of Ireland ($1100 billion compared to $843 billion).

The Spanish exposure is shared roughly at similar apportions by France, Germany, the USA, the UK and the other EU group. Each has, very roughly, 1/5 of the exposure.

Who loses more where?

All lose the most in the event of a Spanish bankruptcy, except the UK that would lose more in the Irish case. However for some countries (Germany, UK) the loses are quite even in the Irish and Spanish cases. France stands to lose the most in Spain and Greece and has few interests in Ireland. The USA is most exposed in the Spanish and Irish cases but being a much larger country and economy the blow would be rather light in any case. Spain stands to lose the most in the case of a Portuguese bankruptcy.

I believe that these are interesting figures and concepts to get familiar with for whatever may lay ahead, which does not look pretty in any case.

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