Ireland’s share of an EU sponsored bailout of Greece would be between €200 million and €400 million, according to an exercise carried out for a European think tank.
Open Europe, a broadly Eurosceptic think tank based in London, has estimated what each EU country would be required to pay if Greece was unable to refinance its debts, of which €20 billion to €25 billion will mature in the coming two months.
Under a series of possible systems, it estimated that Ireland’s share of the bill would be between €227 million and €406 million. The broad range was accounted for by uncertainty of the size of the bailout and the system used for calculating the contribution.
Open Europe said that meeting the cost of the bailout could be either spread among all members of the European Union or confined to those who used the euro as a currency.
Ireland’s largest exposure - of about €400 million - would arise if only eurozone countries were required to pay. Under the system, Germany could be required to pay between nearly €4 billion and €7 billion.
However, there is growing opposition in Germany to the idea of a bailout for the Greeks.
The country’s huge debt and massive budget deficit - expected to be some 13 per cent of GDP this year - is seen as a result of years of profligate mismanagement of the economy.
Last year, the newly-elected socialist government revealed that Greece had been issuing misleading statistics about its economy and its public debt.
The debt crisis has prompted the Greek government to slash spending and raise taxes. It is attempting to bring its soaring deficit under control and convince markets to lend it the money to keep going on a day-to-day basis - in a programme not dissimilar to what the Irish government has implemented in the last 18 months.
However, Greek government bonds must continue to pay a premium in order to persuade markets to buy them, and the danger of a wholesale shutdown of the markets to the Greeks - prompting an immediate crisis in the public finances - remains real.
The EU and the ECB continue to insist on the Greek austerity measures, while holding out firm - but unspecified - promises of help. The understanding between the Greeks and the EU is that the Greeks will be helped - but only if they help themselves.
European leaders, including German chancellor Angela Merkel, Commission president José Manuel Barroso and ECB chief Jean-Claude Trichet have repeatedly warned the Greeks that they could rely on European support or guarantees, only if they implemented the most swingeing cuts in public spending and reforms of the public sector.
Ollie Rehn, EC economic affairs commissioner, last week visited Athens to review the country’s efforts to cut spending, and was uncompromising in his warnings. ‘‘No member of the eurozone area can live permanently beyond its means . . . either you keep your debt under control or your debt starts controlling you," he said.
Rehn’s team of Commission officials concluded that the measures promised by the Greek government would reduce the country’s deficit by only 2 per cent of GDP, partly because the country is suffering a severe recession, and not the 4 per cent promised to Brussels. In response, the Greeks announced a freeze on pensions, more cuts to public sector pay, increases in Vat and duties on fuel, alcohol and cigarettes.
But there has already been widespread opposition among the public to the measures announced before now. Last week, the head of the largest public sector trade union warned the government that his members would not accept all the burden for the retrenchment.
‘‘We are not going to become sacrificial victims, regardless of the struggle to save the country," Spyros Papaspyros said.
If this all sounds familiar to Irish readers, they’re not the only ones. Ireland has been touted as an example by Brussels of a country facing a crisis which brought its finances under control by means of sharp cuts to public spending and steep tax increases.
However, Ireland is more than a slightly smug spectator to the Greek crisis.
Consequences of a Greek failure could include increases in the cost of borrowing for Ireland. Analysts also fear that, if one eurzone member were to default on its debt, the contagion could spread to other potentially vulnerable countries.
That’s why policymakers have been warning the markets that they will not allow betting on a Greek failure - for example, through credit default swaps. Activities such as these will be counteracted by swift changes in regulations.
Last week, Luxembourg prime minister Jean-Claude Juncker, who chairs the council of eurozone finance ministers, said that, ‘‘if the Greeks hold onto the strict parameters and the markets continue to speculate against Greece, we will not let them just march through.
We have the torture equipment in the cellar, and we will show it if needed’’.
Report - Sunday Business Post.
Open Europe, a broadly Eurosceptic think tank based in London, has estimated what each EU country would be required to pay if Greece was unable to refinance its debts, of which €20 billion to €25 billion will mature in the coming two months.
Under a series of possible systems, it estimated that Ireland’s share of the bill would be between €227 million and €406 million. The broad range was accounted for by uncertainty of the size of the bailout and the system used for calculating the contribution.
Open Europe said that meeting the cost of the bailout could be either spread among all members of the European Union or confined to those who used the euro as a currency.
Ireland’s largest exposure - of about €400 million - would arise if only eurozone countries were required to pay. Under the system, Germany could be required to pay between nearly €4 billion and €7 billion.
However, there is growing opposition in Germany to the idea of a bailout for the Greeks.
The country’s huge debt and massive budget deficit - expected to be some 13 per cent of GDP this year - is seen as a result of years of profligate mismanagement of the economy.
Last year, the newly-elected socialist government revealed that Greece had been issuing misleading statistics about its economy and its public debt.
The debt crisis has prompted the Greek government to slash spending and raise taxes. It is attempting to bring its soaring deficit under control and convince markets to lend it the money to keep going on a day-to-day basis - in a programme not dissimilar to what the Irish government has implemented in the last 18 months.
However, Greek government bonds must continue to pay a premium in order to persuade markets to buy them, and the danger of a wholesale shutdown of the markets to the Greeks - prompting an immediate crisis in the public finances - remains real.
The EU and the ECB continue to insist on the Greek austerity measures, while holding out firm - but unspecified - promises of help. The understanding between the Greeks and the EU is that the Greeks will be helped - but only if they help themselves.
European leaders, including German chancellor Angela Merkel, Commission president José Manuel Barroso and ECB chief Jean-Claude Trichet have repeatedly warned the Greeks that they could rely on European support or guarantees, only if they implemented the most swingeing cuts in public spending and reforms of the public sector.
Ollie Rehn, EC economic affairs commissioner, last week visited Athens to review the country’s efforts to cut spending, and was uncompromising in his warnings. ‘‘No member of the eurozone area can live permanently beyond its means . . . either you keep your debt under control or your debt starts controlling you," he said.
Rehn’s team of Commission officials concluded that the measures promised by the Greek government would reduce the country’s deficit by only 2 per cent of GDP, partly because the country is suffering a severe recession, and not the 4 per cent promised to Brussels. In response, the Greeks announced a freeze on pensions, more cuts to public sector pay, increases in Vat and duties on fuel, alcohol and cigarettes.
But there has already been widespread opposition among the public to the measures announced before now. Last week, the head of the largest public sector trade union warned the government that his members would not accept all the burden for the retrenchment.
‘‘We are not going to become sacrificial victims, regardless of the struggle to save the country," Spyros Papaspyros said.
If this all sounds familiar to Irish readers, they’re not the only ones. Ireland has been touted as an example by Brussels of a country facing a crisis which brought its finances under control by means of sharp cuts to public spending and steep tax increases.
However, Ireland is more than a slightly smug spectator to the Greek crisis.
Consequences of a Greek failure could include increases in the cost of borrowing for Ireland. Analysts also fear that, if one eurzone member were to default on its debt, the contagion could spread to other potentially vulnerable countries.
That’s why policymakers have been warning the markets that they will not allow betting on a Greek failure - for example, through credit default swaps. Activities such as these will be counteracted by swift changes in regulations.
Last week, Luxembourg prime minister Jean-Claude Juncker, who chairs the council of eurozone finance ministers, said that, ‘‘if the Greeks hold onto the strict parameters and the markets continue to speculate against Greece, we will not let them just march through.
We have the torture equipment in the cellar, and we will show it if needed’’.
Report - Sunday Business Post.