If Greece Defaults, Europe’s Taxpayers Lose

22-Jun (USAGOLD) — The European creditors embroiled in a last-ditch effort to come to terms with Greece face a dilemma: If they can’t prevent a default, their taxpayers stand to lose a lot of money.

Ever since the region’s sovereign-debt crisis first flared in 2010, European nations have been stepping in for Greece’s private creditors — largely German and French banks — by lending the country the money to pay them off. Thanks to this bailout, banks and investors have much less at stake than before…

On the flip side, European governments — and Germany in particular — have become the largest holders of Greece’s 313 billion euros in sovereign debt, through an alphabet soup of entities that are ultimately backed by taxpayers. Beyond that, as of April, the European Central Bank had lent the Bank of Greece about 115 billion euros to replace money being pulled out of the country — credit that can turn into losses for the ECB’s remaining shareholders if Greece leaves the euro.

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PG View: So the private creditors have been made largely whole . . . leaving the taxpayers of Europe holding the bag.