A Greek exit from the eurozone could expose the European Central Bank and the currency bloc it seeks to protect to hundreds of billions of euros in losses, landing Germany and its partners with a crippling bill.
A Greek departure would take Europe into uncharted legal waters. The size of the burden other eurozone states could bear gives them a powerful incentive to keep Greece in the currency club.
With most of Greek's private creditors having taken heavy writedowns as part of the country's second, 130 billion euros bailout, it is estimated that the ECB, International Monetary Fund (IMF) and eurozone nations hold approaching 200 billion of its debt.
"In the event of an exit, they [Greece] will default. And the loss given default will probably be very high, high enough to eliminate the ECB's capital," said Andrew Bosomworth, senior portfolio manager at asset manager Pimco.
"They might need recapitalisation from governments, who are not exactly in the best position to provide additional capital."
Those are not the only losses the ECB and its national shareholders might face.
Even once Greece had left the currency club, the costs to the rest of the euro zone would continue to mount as it would probably be compelled to avert a complete Greek collapse and wider contagion.
"Large-scale ECB intervention would be necessary to stabilize the system, along with intervention from Germany, the European Stability Mechanism [ESM], its predecessor the European Financial Stability Facility [EFSF], and the IMF, potentially costing hundreds of billions of euros," said Georgios Tsapouris, investment strategist at Coutts.
The ECB, which has its own paid-in capital of 6.4 billion euros, is essentially a joint venture between the 17 eurozone national central banks (NCBs). Combined, the Eurosystem of eurozone central banks has capital and reserves of 86 billion euros.
The national central banks would divide up any losses between them according to the 'capital key' — the ECB's measure of countries' stakes in its financing based on economic size and population. Germany would bear the biggest loss, some 27 percent of the total.
France would take a big hit too.
A Greek exit from the eurozone could cost the French taxpayer up to 66.4 billion euros and saddle the country's banking system with 20 billion euros in lost loans, according to a study published on Tuesday by the IESEG School of Management in Lille.
Smaller countries with less robust national central banks than the German Bundesbank would likely be still harder hit in relative terms.
"The ECB and some of the NCBs with little loss-absorbing capital and reserves relative to their share of how a loss would be allocated across the Eurosystem would potentially see their capital and revaluation reserves written off," Bosomworth said.
However, with fresh Greek elections called for June 17 and an anti-bailout leftist party ahead in the polls, some within the EU's corridors of power wonder whether the show is worth keeping on the road.
"It's going to hurt, absolutely. But is it going to be lethal?" one EU diplomat said. "We have two bad choices, but one is worse than the other."
The ECB and national central banks are exposed to Greece in three main ways: via Greek sovereign bonds the ECB holds, via Greek collateral they hold in return for ECB loans and via Greece's liabilities for transactions over the eurozone's TARGET2 payments system.
The ECB has spent about 38 billion euros on Greek government debt with a face value of about 50 billion euros.
Under a scenario described in German weekly Der Spiegel, the euro zone's EFSF bailout fund could be used in the event of a Greek default to continue funding Greece's debt obligations to the ECB.
However, this would eat into the resources of the 'firewall', eroding its capacity to help other eurozone states which might well need to be protected if a Greek exit sparked contagion.
An alternative scenario could see the national central banks turning to their governments to recapitalize the ECB. But going cap in hand to politicians for money they are desperately short of risks undermining the ECB's independence.
ECB loans to Greek banks are another way the central bank is exposed but in this case, although the ECB conducts these medium- and long-term lending operations (MROs and LTROs), the funds are distributed via the national central banks and carried on their balance sheets.
A Bank of Greece financial statement on its website showed that as of Jan. 31 it had lent out some 15 billion euros in MROs and 58 billion euros in LTROs — a total of 73 billion.
It was holding 143 billion euros in assets eligible as collateral for eurozone monetary policy operations.
Berenberg Bank economist Christian Schulz said that in the event of a Greek exit these loans and most of the collateral may be converted into a new Greek currency.
"The ECB/Eurosystem would not bear the risk anymore," he added, noting that the Bank of Greece would instead be left with the — likely devalued — loans and collateral.
But any funds Greek banks had taken using ECB loan operations that had subsequently found their way out of Greece could pose a problem. These would be added to the Bank of Greece's liabilities under the TARGET2 payments system.
The Bank of Greece and other peripheral eurozone countries have built up liabilities within the euro zone's cross-border payment system, TARGET2, due to a net outflow of payments to other countries in the bloc, a trend exacerbated by the debt crisis.
The Bank of Greece's financial statement showed that as of January it was carrying TARGET2 liabilities of 107 billion euros — a sum that has likely remained around that level since and which represents a big potential problem for the other eurozone central banks.
"TARGET2 is the biggest risk if they really take that loss," said Schulz, adding that a Bank of Greece collapse would leave central banks remaining in the eurozone with a loss.
"But it's far from clear whether the full TARGET2 balance would be what Europe would lose," he added.
The ECB could monetize any net TARGET2 loss in the event of a Greek euro exit by printing money but that would come with an inflationary effect unpalatable to policymakers in Germany, the bloc's most powerful player.
Beyond the accounting implications for eurozone central banks is the systemic impact a Greek euro exit would have on the bloc's banking system. Savers in other periphery countries are likely to take flight.
"If they see that Greek savers have seen their euro savings overnight being converted into drachma, which could depreciate by 50-70 percent, then it would be a fairly simple hedge strategy for them to take out some of their savings and put them into Luxembourg, or pounds sterling, or Swiss francs," said Bosomworth.
Ultimately, Greece will decide whether it leaves the euro zone but the ECB can try to head off such a scenario.
ECB President Mario Draghi said on Wednesday that "our strong preference is that Greece will continue to stay in the eurozone".
"What they can do is try to prevent contagion — where they have a very significant role — and they will probably also try to convince participants on all sides to keep Greece in the euro area," said Citigroup economist Juergen Michels.
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