Author: John King, Quacera
Covestor model: QPM Radar
The rumor spread by Der Spiegel last Friday, that Greece was threatening to leave the Euro, was likely a plant by the German government to bring the inevitable restructuring to resolution. On Sunday (5/8) the announcement was made that the bankruptcy was being finalized.
So who gets hit?
Japanese banks hold $500 million in Greek debt; Spanish banks hold $600 million; U.S. banks – $1.8 billion; Italian banks – $2.6 billion; UK banks – $3.2 billion; French banks -$19.8 billion; German banks – $26.3 billion; The other Eurozone countries hold $15.7 billion. Fortis, one of Europe’s largest Insurance companies, has 39% of its tangible book value in Greek debt, Portugal’s Insurance and private holders have 25% of book value parked there, and 69% is Italy’s share. Romania and Bulgaria rely on Greece for 25% and 45% of those respective country’s loans.
We think the worst pain will be felt in Spain where there was a larger real estate bubble than either the U.S. or U.K. and with that collapse, the unemployment rate is currently 20.8%. Once the Greek reorganization is finalized, Ireland has already said it will expect the same terms or they too will default and the cascading PIIGS debt will be underway. Inflation pressures from all the currency expansion that results will be very high and if this pushes Spain and Portugal into the maw, we could see a big rally in the dollar
Source:
“Greece Considers Exit from Euro Zone” Christian Reiermann, Spiegel Online, 5/6/11
http://www.spiegel.de/international/europe/0,1518,761201,00.html
