The Biggest Beneficiary From Troika Bailouts Is Germany

I read an interesting article last week that suggested that the biggest beneficiary from troika bailouts has been Germany.

The general gist was that in late 2009 German banks were exposed to some $700 billion of debt in Greece, Ireland, Italy, Portugal and Spain. I think the figures came from the BIS (Bank of International Settlements).

The troika bailouts in Greece, Ireland, Portugal and Spain made it possible for the German banks to get their money back.This showed as capital flight from those countries and worsened the respective crises.

What the bailouts effectively did was shift the debt burden from the German banks onto the that of the bailed out countries.The amount involved is apparently circa $400 billion. Note that the original exposure of $700 billion included Italy which has not been bailed out.

More damning still for Germany, the €Z component of the bailout loans to the crises countries were spead across the entire zone. Germanys risk contribution is just 27% of the total.

So all those suffering from austerity in Greece, Ireland, Portugal and Spain can rest assured that they have done their bit in rescuing the German banks.

Sooner or later it is all going belly up in the €Z and all member states will be called to account for their ESM guarantees.

Then the taxpayers of the entire €Z can congratulate themselves on saving the Germany banks.

Not a nice picture.