Sunday 21 January 2018

Irish banks owed €6bn by shaky Greek economy

A SMALL group of Irish banks may be dangerously exposed to more than €6.1bn in perilous Greek debt, according to a new report.

Greece is teetering on the edge of a financial abyss, with increasing fears that the country may default on its debt as Greek bond yields soared on uncertainty over the economy.

This has led to suggestions that Europe was preparing a rescue plan for the stricken Balkan state. The exposure may take the form of sovereign, corporate and bank debt, according to BNP Paribas analyst Olivia Frieser, citing figures from the Bank of International Settlements in a report to clients.

However hedging could have reduced the overall exposure. “Irish bank exposure would be spread over a few banks only,” according to Ms Frieser. Ireland and the UK account for 23 per cent of outstanding Greek debt, according to figures published in the Financial Times last week.

“In the unlikely event that Greece lost its access to funding markets, we believe that it would get help from its European partners to avoid a default — precisely because of the potential contagion risk, we think other EU countries would not want to live through what might happen otherwise,”

Bank of America Merrill Lynch said in a note. However, the European Commission said an EU bailout of Greece was not possible, speaking as the euro meanwhile fell to the lowest level in more than six months against the dollar. Greece is not the only risky economy that Irish banks may be exposed to, according to BNP Paribas.

Last week’s report suggests that Irish banks may be on the hook for nearly €23bn worth of Spanish debts of various varieties, including sovereign, corporate and bank debts. This may become more of an issue, with “rockstar” economist Nouriel Roubini describing Spain as posing a bigger problem for the EU than Greece.

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