While Greece has a big vote of no-confidence today, and a bailout vote to come, London-based think tank Open Europe has already calculated what the cost of bailout two would be for Europe’s tax payers.Open Europe estimates that:
Under a second bailout, the share of Greece’s debt underwritten by foreign taxpayers (via the EU, ECB and the IMF) will go from 26% today to a massive 64% in 2014. Put differently, each household in the eurozone today underwrites €535 in Greek debt – by 2014 and following a second bailout, this will have increased to a staggering €1,450 per household. On top of this, there are also numerous European banks which are largely taxpayer owned which have significant exposure to Greece (for example the Belgian-French Dexia and German Hypo Real Estate). This makes a second Greek bail-out far more politically contentious than any of the existing rescue packages, given the likelihood of debt write-downs with taxpayers footing a huge chunk of the bill.
That’s $2080 per household in the eurozone, a significant rise on the cost per household ($768) of the previous bailout. Notably, a default will likely also increase costs for individual governments if their banking sectors are to be affected, which could be passed on to taxpayers.
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