Excellent graphic from John Cochrane's blog about the ownership of European government debt.
The graph shows that nearly four-fifths of Greek debt (estimated at 319 billion euros in end-2014) is "foreign official", or owned by other governments. This explains both the absence of market contagion (the European bourses rose on the election results were announced) and the consternation among Eurozone's core area members in the aftermath of the election victory of anti-austerity Syriza party of Alexis Tsipras.
If Tsipras stays the course with his pledge to renegotiate the terms of the country's 240 billion euros bailout package which would force losses on countries like Germany and France, a bitter game of chicken is on the cards. However the country's resolve to stay on in Eurozone and its dire need for loan payments to pay off debts and keep the country running weakens his bargaining position.
In any case, at 174% of GDP in 2014, Greece's debt-to-GDP ratio is surely unsustainable and cannot be stabilized without deep debt write-offs. Bailouts without haircuts are merely kicking can down the road.
If Tsipras stays the course with his pledge to renegotiate the terms of the country's 240 billion euros bailout package which would force losses on countries like Germany and France, a bitter game of chicken is on the cards. However the country's resolve to stay on in Eurozone and its dire need for loan payments to pay off debts and keep the country running weakens his bargaining position.
In any case, at 174% of GDP in 2014, Greece's debt-to-GDP ratio is surely unsustainable and cannot be stabilized without deep debt write-offs. Bailouts without haircuts are merely kicking can down the road.
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