Business

Leaked Memo Reveals Devastating Consequences of a Greek Default

Leaked Memo Reveals Devastating Consequences of a Greek DefaultFor months now, The Blaze has meticulously covered events in Greece as they have unfolded and, for anyone who has been paying attention, the situation does not look good. Indeed, many analysts believe that the eurozone crisis will only get worse.

But perhaps you still think it’s just a lot of “Chicken Little” nonsense and that a Greek default wouldn’t be that “that bad.” Well, perhaps this leaked memo from the Institute of International Finance (IIF), the organization representing private sector holders of Greek debt in official negotiations, will change your mind.

“[The memo] gives us the most detailed data we’ve seen so far about how the eurozone and the world would be affected by such a move,” writes Business Insider’s Simone Foxman. “It also explains just why EU leaders are doing everything in their power to prevent a disorderly default and Grexit [Greek exit] — the costs would be absolutely astronomical and the fallout uncertain.”

Indeed, judging by the language used in the leaked memo, eurozone leaders are far more afraid of a Greek default than they have been willing to admit.Leaked Memo Reveals Devastating Consequences of a Greek Default

“And while investors may think that these costs are ‘priced in,’” Foxman notes, “a Greek hard default really might just be another Lehman.”

Which is to say, “disastrous.”

Here are some of the most frightening implications from the IIF’s confidential report (via Athens News and Business Insider):

1. “First, Greece would fail to honor payments on its €368 billion ($486 billion) in debt obligations,” Foxman writes, “That would probably collapse its banking system.”

Indeed, according to the IIF, that would immediately threaten:

  • €91 billion in Greek banks’ obligations to foreign lenders and depositors, €28 billion of which are in the eurozone
  • €247 billion Greek households and companies owe to Greek banks. 15 percent of these loans are already nonperforming.
  • €21 billion that Greek corporations owe to foreign lenders

2. €73 billion of Greece’s debts are held by eurozone countries and the IMF, which means if the small Mediterranean country can’t make its payments . . .

“Additionally, the IIF estimates that the official sector — either governments or bailout funds — would easily have to provide €160 billion ($211 billion) to make sure banks don’t go under, or else force higher capital-to-liabilities ratios through sharper deleveraging,” Foxman writes.

3. The European Central Bank (ECB) could be irreparably damaged. According to IIF estimates, the ECB has as much as €177 billion ($234 billion) tied up in Greece:

  • €43 billion in Greek government bonds purchased as part of the Securities Markets Program
  • €110 billion in Greek government bonds and other securities that domestic banks used as collateral to borrow from the ECB
  • €24 billion in loans to Greek banks through the emergency liquidity assistance program (ELA)

Leaked Memo Reveals Devastating Consequences of a Greek Default4. Given all the above, there is probably no way that Greece will be able to stay on the euro – or in the eurozone for that matter (via Athens news [emphasis added]):

“Given these financial traumas, it is difficult to conceive that Greece can remain a functioning member of the Euro Area in the event of a disorderly default. The Greek authorities would have little option but to regain monetary policy independence by exiting from the Euro Area and introducing a new national currency…

The issue of whether Greece can remain in the European Union after defaulting and leaving the Euro Area is not clear-cut. The likely imposition of capital controls and possible inability to honor other EU laws and directives would raise important questions.”

5. Perhaps the biggest threat is that, as many analysts have been saying for months, the Greece contagion will spread [author’s note: can we call it a Greece Fire? Has anyone done that yet? If not, we claim it]. In fact the IIF believes the fears about the possibility of a Greek contagion are actually understated:

Financial linkages are potentially more powerful, especially since market developments since the onset of the crisis in 2007 have highlighted a propensity for “runs” to occur on a scale and at a pace that had previously been unimagined. Many policy makers incorrectly believed that the fallout from a Lehman bankruptcy would be contained, since markets had been apparently pricing in a significant default risk well ahead of the actual event.

Click here to see the full IIF report / Read the full BI list here

Comments (57)

1 2
  • D-Fence
    Posted on March 7, 2012 at 9:39am

    And we’re going down the same path. Look at the ratio we have per capita. The worst in the world. Vote Obama out.

    Report Post » D-Fence  
  • GrayPanther
    Posted on March 7, 2012 at 9:23am

    Putting good money from America and the EU is like putting thousands into a used car beyond its value. After a while your goal is to not waste the money you have already put in and the dance goes on. It’s time for the loans to stop and let the weak Greek economy collapse back into its own economy. Actually, thats what the other countries should do. The EU only benefits Germany as it stands. And even Germany is trapped into this mess by its own doing.

    Report Post » GrayPanther  
  • jnobfan
    Posted on March 7, 2012 at 8:27am

    Looking at those numbers the Europens are only on the hook for about 1/3 of the bad paper.
    Guess who holds most of the rest?
    Another too big to fail? Do we keep printing money and throwing it down the mouth of the volcano?
    Yes and yes.
    Germany will probably bail after we pick up the check. France too dumb and socialist.

    Report Post »  
  • chicago76
    Posted on March 6, 2012 at 10:00pm

    The only question now is,”How much of our country are we willing to give up to temporarily maintain our lifestyle?” like in Greece.

    Report Post »  
    • Pro-Palin
      Posted on March 7, 2012 at 8:20am

      well put , and for how long will we continue to band aid or ignore the obvious?

      Report Post » Pro-Palin  
  • chicago76
    Posted on March 6, 2012 at 9:54pm

    Why are prices of goods coming from China and other third world countries still stable or going down while the prices of gas and other commodities are going up. The costs of production go up but the prices go down. Hmmm, who is getting screwed, the people doing the labor are getting screwed. Is America and the rest of the west now so corrupt that their economies do not deserve to exist in the form they are now?

    Report Post »  
    • groundzero
      Posted on March 6, 2012 at 10:47pm

      Not this current crony capitalism of BIG GOVERNMENT controlling the individual taxpayers money!!!This current government is as close to socialism as I‘ve ever seen in my life and IT’S NOT WORKING as always in history. You know that HOPE & CHANGE bull crap to mean SOCIALISM.

      Report Post » groundzero  
    • Chuck Stein
      Posted on March 7, 2012 at 2:51am

      There you go, Chicago76 — Groundzero has your answer.

      Report Post »  
  • MammalOne
    Posted on March 6, 2012 at 9:24pm

    Wtf is the “eurozone”? I believe it’s called “Europe”.

    Report Post » MammalOne  
    • Chuck Stein
      Posted on March 7, 2012 at 2:54am

      The “eurozone” is the part of Europe that uses the currency called the “Euro”
      Now: stop smoking that demon weed and give your brain a well-deserved break.

      Report Post »  
  • Razorhunters
    Posted on March 6, 2012 at 8:19pm

    Breitbart Murdered, Jerome Corsi Reports FULL LENGTH
    http://www.youtube.com/watch?feature=player_detailpage&v=LM7HHrwiVqg

    Razorhunters  
    • OVMAMA
      Posted on March 8, 2012 at 1:47am

      Wow, I just watched that…. LORD have mercy!

      Report Post » OVMAMA  
  • GrumpyCat
    Posted on March 6, 2012 at 8:09pm

    Isn’t the Institute of International Finance (IIF) akin to the fox guarding the henhouse? Isn’t this “leaked” memo rather self-serving?

    The damage has already been done. Quit pretending Greece will ever make good on their debt or even be able to service the accrued interest. Is time for a bankruptcy court to divvy up the country to its debtors.

    Report Post »  
    • lowerclassrepublican
      Posted on March 6, 2012 at 10:26pm

      100 billion of that 290 is just what has already been spent to prop them up. This is why you don’t have a universal money. Standards in each country are financially different.

      Report Post »  
    • Kerstile
      Posted on March 7, 2012 at 2:39am

      This is where wars originate. WWIII is on the horizon. The lookout can see it clearly. The whole world is on fire.

      Report Post » Kerstile  
  • balrog25
    Posted on March 6, 2012 at 8:01pm

    Tick, Tick, Tick. What started as a wrist watch should be sounding like Big Ben by now. If you are not completely deaf, WHY HAVEN’T YOU PREPARED YET? Get started and keep going. Defensive weapon, go bag, a few weeks food and water, some cash and some coin. Get these in hand today, build on it as you can tomorrow, and tomorrow and tomorrow. Tick Tick Tick. Pray fervently, pray often.

    Report Post » balrog25  
  • robinakilt
    Posted on March 6, 2012 at 7:58pm

    Buy guns, ammo, food and water it is going to be a bumpy ride. Actually, don‘t just consider me and others like a nut job and just keep spending on TV’s and other gizmos and gadgets you can eat them is the system collapses and store run out of food, because we are just crazy people.

    Report Post » robinakilt  
  • shogun459
    Posted on March 6, 2012 at 7:42pm

    And Obama is rushing to make us more like Greece.
    Need we say more about Obamas intentions for the US?
    Traitor!

    Report Post » shogun459  
  • shogun459
    Posted on March 6, 2012 at 7:40pm

    World Wide Wipeout.
    A financial Niagra Falls, and we are in a barrel.

    Report Post » shogun459  
  • Razorhunters
    Posted on March 6, 2012 at 7:39pm

    Let Your Life Be a Friction to Stop the Machine
    http://www.youtube.com/watch?feature=player_embedded&v=N2Xh5eN2fXY

    watch this form your own opinion of what
    america is…

    Report Post » Razorhunters  
  • Snowleopard {gallery of cat folks}
    Posted on March 6, 2012 at 7:29pm

    We are looking here at more than a complete economic collapse of Greece; this is well on the way to the ultimate worse case manner – complete economic, political and social collapse across the board, the only thing worse will be anyone who survives a limited nuclear exchange (if one ever happens).

    The only two questions after Greece implodes fully are these:

    How long until the rest of the EU goes under with it?
    How long until the USA goes under, no thanks to Obamas idiocy of euro-for-dollars, how long?

    After that there is no guarantee what will happen save for an incredible chance of another regional or full global war erupting; and if that occurs, the blood flowing will make WW2 pale by comparison.

    Report Post » Snowleopard {gallery of cat folks}  
    • lukerw
      Posted on March 6, 2012 at 8:10pm

      The attitude of the Greeks is… a Total Disbelief that this Crisis could happen… as their Idealogy only supports a Progressive Socialist outcome… where they would live in an Utopia. And, the rest of the EU is alike: THEY HAVE NO PLAN B (fall back; reduced socialistic program)! So, they are Locked into a Hard & Complete Failure… whereby they will turn to Dictatorship… of whomsoever promises to provide Utopia! They are ALL IN!

      Report Post » lukerw  
    • chicago76
      Posted on March 6, 2012 at 9:29pm

      Luker is correct. Greece is in the stage of complete government breakdown. Now they are accepting the tyranny of the Eurobanks because the Eurobanks are making the most promises to them. What happens when the Eurobanks can no longer make good on their promises because no body wants their money?

      Report Post »  
  • TRILO
    Posted on March 6, 2012 at 7:28pm

    Did anyone really think that when the global ponzi scheme comes crashing down that all would be ok? The central banks across the globe have been playing with paper and digital money. With the latest Greek bailout the Greek people owe more than they originally owed. The people have been ripped off and their country will have nothing left. The only winners are the central banksters. The private bond holders have been ripped a new one with 70% of their bond holdings stolen. They are told that it is not a default so the CDS contracts do not kick in. We are witnessing pure criminal actions and pure disregard for contract law right before our eyes witn no consequences for the powers that be.

    If people think this will not come to the shores of our country they are sadly mistaken. Worst yet, most of the sheeple do not even know or care what is going on. Our country is bankrupt; morally, ethically and financially. The more they print the further down the drain we are flushed.

    Report Post » TRILO  
    • chicago76
      Posted on March 6, 2012 at 9:39pm

      Well said. The whole west is bankrupt. One question. If the west is bankrupt, who is supporting our lifestyles? The third world countries are. The west is using money printing to drain the third world of their assets and leave them totally poverty stricken. The banksters of the west, Chinese now can be included in that, are buying up at bargain prices assets in third world countries simply by printing money. And using those assets to keep the living standards in the west high, while the third world countries become more and more impoverished as the value of the money they are given goes down further and further.

      Report Post »  
  • JP4JOY
    Posted on March 6, 2012 at 7:23pm

    Because the financial institutions all own each other, if you start causing the circulation of debt in the system to breakdown or stop the whole system crashes. The world financial system is akin to a giant check kiting scheme. Peter owes Paul so Paul can pay Roger who then pays Peter, only on a much larger scale. None of their “money” has any real value other than what they say it’s worth. The avenue of last resort so as not to default will be to print money like mad and hyper-inflate their debts away. Their books will balance but the money will be worthless.

    Report Post » JP4JOY  
    • chicago76
      Posted on March 6, 2012 at 9:42pm

      Well said, the ultimate deception and criminality of the international banking system is the destruction of the economies of all the countries in the world who have come to depend on that international banking system.

      Report Post »  
  • jlroejim
    Posted on March 6, 2012 at 7:20pm

    Let me see, Greece starts the snowball, total collapse of world economy, Putin elected in Russia, loves Syria, Israel attacks Iran to stop nukes thus gas $ 8.00 or higher, our economy gone, gone, gone, anyone believe in Revelations now?

    Report Post » jlroejim  
    • SamIamTwo
      Posted on March 6, 2012 at 7:31pm

      I know it will all pan out, God’s way…not man’s.

      Report Post » SamIamTwo  
    • lukerw
      Posted on March 6, 2012 at 8:14pm

      GOD sees All… does not mean that GOD Condones All!

      Report Post » lukerw  
    • We are Americans
      Posted on March 6, 2012 at 8:53pm

      Unfortunately it’s going to happen. When, I
      really don’t know. I pray for all my brothers and
      sisters. Reading this letter by Peter always both
      troubled me and made me look forward to the time
      when we would shed no tears. Like birth , death is
      a painful process. For the new heaven and earth
      to come this one must end. Man is both good and
      bad as are our souls. Your soul is immortal.
      Good or bad you will go on. It’s your choice how
      you choose to live and treat people. Choose love.
      Choose respect. Its God’s choice if your invited
      to His party Anyway, read this letter from
      Peter. We will nuke ourselves to death or the sun will
      supernova and Earth will end. By fire. Then Judgment
      of our souls. When, only the Creator knows. We give great
      praise to Yahwah.
      By the same word the present heavens and earth are reserved for fire, being kept for the day of judgment and destruction of ungodly men.

      But do not forget this one thing, dear friends: With the Lord a day is like a thousand years, and a thousand years are like a day. The Lord is not slow in keeping his promise, as some understand slowness. He is patient with you, not wanting anyone to perish, but everyone to come to repentance.

      But the day of the Lord will come like a thief. The heavens will disappear with a roar; the elements will be destroyed by fire, and the earth and everything in it will be laid bare.

      as you look forward to the day of God and speed its coming.That day will bring about the d

      Report Post »  
    • We are Americans
      Posted on March 6, 2012 at 8:57pm

      By the same word the present heavens and earth are reserved for fire, being kept for the day of judgment and destruction of ungodly men.

      But do not forget this one thing, dear friends: With the Lord a day is like a thousand years, and a thousand years are like a day. The Lord is not slow in keeping his promise, as some understand slowness. He is patient with you, not wanting anyone to perish, but everyone to come to repentance.

      But the day of the Lord will come like a thief. The heavens will disappear with a roar; the elements will be destroyed by fire, and the earth and everything in it will be laid bare.

      as you look forward to the day of God and speed its coming.That day will bring about the destruction of the heavens by fire, and the elements will melt in the heat. But in keeping with his promise we are looking forward to a new heaven and a new earth, the home of righteousness. (2 Peter 3:7-10, 12, 13 NIV84)

      Report Post »  
  • VoteRightDammit
    Posted on March 6, 2012 at 7:12pm

    The problem: Greece can‘t pay it’s bloated debt. A default will leave many Euro banks (and the IMF, etc.) with big losses.

    The Euro / IMF solution: lend more to them more so they don’t default.

    I think Obastard/Soros are spreading socialist mind-speak to Europe, not the other way around.

    Report Post » VoteRightDammit  
  • normbal
    Posted on March 6, 2012 at 7:11pm

    “Greek Fire.” A once dreaded weapon of unimaginable force. Once used, the fires it would start couldn’t be extinguished. Yes, very appropriate. Not a “Greece/grease fire,” but something out of antiquity, poorly understood, feared by all. And it’s coming.

    Report Post » normbal  
    • Onowicit
      Posted on March 6, 2012 at 7:35pm

      yea yea i know BUT did you hear Rush called some girl a slut.

      Report Post » Onowicit  
    • CatB
      Posted on March 6, 2012 at 7:39pm

      Yes .. pay no attention to the world on fire … a slut was called a slut .. .news at 11

      Report Post »  
    • Darmok and Jalad at Tanagra
      Posted on March 6, 2012 at 8:05pm

      Jane you ignorant slut. Dan Ackroyd. SNL. (when it was good)

      Report Post » Darmok and Jalad at Tanagra  
  • Razorhunters
    Posted on March 6, 2012 at 7:10pm

    “” Leaked Memo Reveals Devastating Consequences of a Greek DefaultFor months now, The Blaze has meticulously covered …”

    barry obama/soetoro/brounel

    when are we going to see this headline…?

    most know of the bs going on in greece and the eu and the fed.

    Report Post » Razorhunters  
    • Razorhunters
      Posted on March 6, 2012 at 7:16pm

      “” Leaked Memo Reveals Devastating Consequences of …For months now, The Blaze has meticulously covered …”

      Report Post » Razorhunters  
  • Mark0331
    Posted on March 6, 2012 at 7:09pm

    Remember in Animal House, at the end, Kevin Bacon trying to do crowd control and nobody caring? Why does this time in history remind me of that scene? Grab the popcorn, bullets, beans and fresh water..here we go!!

    Report Post » Mark0331  
  • progressiveslayer
    Posted on March 6, 2012 at 7:04pm

    It’s amazing that some people think socialism is so great,Greece,like every other socialist country fails it’s very consistent.When you run out of other peoples money you get Greece,and we’re in the on deck circle.

    Report Post » progressiveslayer  
    • Baddoggy
      Posted on March 6, 2012 at 7:09pm

      @ Slayer…Thats why I always say that socialism is a mental disease called insanity. But yet they try it again and again. We have dabbled too far into the socialistic waters too. We are done. No way we will recover from this. The new Republic will be built on the Constitution or i will die trying to get it there…

      Report Post » Baddoggy  
    • CatB
      Posted on March 6, 2012 at 7:11pm

      Indeed ..and instead of continuously feeding it .. they should have let it fail from the start … of course the EU was a STUPID idea to begin with … like playing with a house of cards. Socialism — Obama’s wet dream .. America’s nightmare.

      Report Post »  
    • Darmok and Jalad at Tanagra
      Posted on March 6, 2012 at 7:16pm

      To me, it’s a bunch of con men, who sell a pyramid scheme, but them and their buddies get thiers first. Everyone else is left holding the bag.

      Report Post » Darmok and Jalad at Tanagra  
  • lstoddard004
    Posted on March 6, 2012 at 7:03pm

    This is the beginning! Countries who run socialism and give out entitlements to every citizen will fall. Wake up USA!! Italy, Britian, they are showing us what will be historic events. We know that socialize medicine does NOT work as well.

    Report Post »  
  • Baddoggy
    Posted on March 6, 2012 at 6:56pm

    This is going to be Biblical….count on it. If you have not prepared you are toast.

    Report Post » Baddoggy  
  • Darmok and Jalad at Tanagra
    Posted on March 6, 2012 at 6:55pm

    Maybe the most damning piece of evidence is when Greece disconnected their phone and stripped all of the plumbing, electrical fixtures, appliances, and pooped on the floor before they moved out in the middle of the night. No EU, you won’t be getting your money back from them.

    Report Post » Darmok and Jalad at Tanagra  
    • Baddoggy
      Posted on March 6, 2012 at 7:10pm

      I had renters just like that one time…Kinda made me mad.

      Report Post » Baddoggy  
    • Darmok and Jalad at Tanagra
      Posted on March 6, 2012 at 8:00pm

      My sister had renter that were like that. The worst one dumped two bags of Plaster of Paris down the toilet. It cost her $5,000 to have a plumber break out the sewage line.

      Report Post » Darmok and Jalad at Tanagra  
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