With the Greek default and liquidity crisis changing by the day and the likelihood of an exit from the Euro, Eurozone countries are counting the cost of their exposure, with Finland reckoned to potentially lose €2.7 billion.
In an interview with tabloid paper Ilta Sanomat, Nordea Bank chief economist Jan Von Gerich revealed that all lenders involved, including Finland who has extended €3.7 billion in credit to Greece’s central bank, would likely never get it back.
He calculated that the actual cost, less collateral guarantees of about one billion euros, would be at least two billion, significantly lower than the €90 million that Germany is exposed to but still hefty for the small Scandinavian nation. He conceded that roughly two-thirds of the amount owing would never be paid back.
Greece’s national debt stands at 175 per cent of its GDP and it defaulted on its IMF loan on July 1st, leading to a closure of banks and capital controls to avoid panic withdrawals. Drawn-out negotiations with Greece’s new left-wing government failed to find agreement on the austerity package of tax increases and pension cuts that have pushed the country into recession and high unemployment for three years.
A referendum scheduled for Sunday, to shore up the government’s brinkmanship on an unfolding unprecedented crisis in the currency’s 16 year history, is largely expected to be a yes/no endorsement for Greece to remain in the Euro and accept the terms, or return to the Drachma, costing Finland and other Eurozone members a great deal in bad bailout or liquidity loans.