Thursday 25 May 2017

The ins and outs of what a deal could mean

Q&A

Thomas Molloy

Thomas Molloy

•So it looks as if the Greeks are finally going to be allowed to default. That's nice for them but who will pick up the bill?

The French, German and Italian banks who lent them the billions in the first place.

•How much do the Greeks owe these clowns?

Somewhere between €50bn and €60bn. This means the banks' shareholders are about to wave goodbye to a big wedge of money. The good news is that Irish banks were so busy lending to developers here that they hardly lent a cent to Greece.

•Who will lose the most when Greece defaults?

The big seven are Fortis, Dexia, Societe Generale, BNP Paribas, ING, Barclays and Deutsche Bank which own more than €30bn worth of Greek bonds between them.

•Hardly household names but they seem familiar somehow.

Most of them were also enthusiastic lenders to Lehman Brothers before it went bust three years ago.

•Can these fools really afford to lose even more money?

All of these banks won't be able to report a profit for a year or two and some of them will need extra cash.

•A bit like Allied Irish Banks and Bank of Ireland back home. How do Pierre and Hans like the idea of bailing out their banks? I seem to remember they were pretty keen on Paddy bailing out the banks by himself a few years ago?

French President Nicolas Sarkozy isn't too fond of the idea these days and wants some sort of European solution.

•Zut alors! One rule for the French and another for the Irish.

The problem for little Nic is that the Germans don't like his idea either. Chancellor Angela Merkel is saying that each country should foot the bill for helping their own banks. Luckily for her, the German banks have been rather more sensible than their French counterparts.

•Even without German help, surely the French can stump up a few billion to save their banks? This is France after all, the proud owner of half the world just a few decades ago.

The French are still good for a euro or two but Sarkozy has made the retention of the country's triple-A rating one of his main policies. The rating agencies are already antsy about the size of the French national debt.

Any further borrowing could break the camel's back and lead to a downgrade. This would be really bad news because the French would then have to pay higher interest for their borrowings.

•'Tant pis', as they say in Paris. Didn't we trash our whole country to save the banks here? Why can't the French take their medicine?

France is a country of 60 million people at the heart of the European project. We are a little country which has been driving everybody crazy for years by boasting of how wonderful we are. The French make the rules and we follow them. That's why we kept on voting on Lisbon and Nice until we got the right answers.

•It just all seems a little unfair!

A better way to look at it all is to say that "France's difficulty is Ireland's opportunity". If France is bailed out by the rest of Europe, then Enda Kenny and Michael Noonan can make a very good case for Ireland's bank debt to be written off in a similar way.

No country has bigger bank debts than we do, so we might be able to get rid of up to 40pc of the national debt this way. You can be sure they will be discretely popping the champagne corks in Merrion Street if Sarkozy manages to persuade the Germans to bail out the French banks.

Irish Independent

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