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Malta has highest exposure to Greek eurozone exit at 4.3% of GDP

Greek elections set tone for eventual eurozone exit, raising questions of exposure to default on loan.

Matthew Vella
28 May 2012, 12:00am
Greece's eurozone exit would see it reverting to the drachma.
Greece's eurozone exit would see it reverting to the drachma.

Malta is the EU's most exposed of member states to a Greek exit from the eurozone, risking some of the biggest side-effects from a so called 'Grexit' if on 17 June Greek voters back parties who want to seek renegotiated terms on the EU-IMF bailout.

Malta granted €56 million in bilateral loans to Greece and another €56 million was guaranteed in a second bailout through the European Financial Stability Facility. A possible Greek exit will mean some, if not most of these loans will be lost once Greece decides to default.

Japanese investment bank Nomura tagged Malta's exposure as a percentage of its GDP at 4.3%, the highest of all EU states, followed by Estonia (4.2%), Slovenia (3.9%), and Slovakia (3.7%). The EU state with the lowest exposure is Luxembourg at 1.8% of its gross domestic product.

Whether Malta can afford the haircut on the Greek repayment is another matter: embattled countries like Spain, Portugal and Ireland have billions loaned out to Greece. Spain and Italy are the fourth and third largest lenders respectively, with €30 billion and €46 billion loaned out.

EU leaders were warned late last week in Brussels to prepare for a possible Greek exit from the eurozone.

If the Greeks back the parties seeking new terms on the loan repayments, in a bid to ease an austerity programme that has crippled a nation suffering high unemployment, the likelihood is that European creditors like Germany could stop the loan disbursements to Greece.

The theory is that without cash to pay out even civil service salaries, Greece will have to turn to its old currency - the Drachma - to pay its employees, the first step to an eventual 'Grexit' from the eurozone by 2013.

Already €73 billion in disbursements to Greece have taken place since May 2010. In March, eurozone finance ministers approved a second programme for €130 billion until 2014, including €28 billion from the IMF, to be released according to Greece's performance.

Financial consultant Alfred Mifsud, formerly Mid-Med Bank chairman, wrote in his blog that it was unlikely that the EU was not preparing a contingency plan for the Grexit.

While Greek default appears unavoidable, the risks of contagion to countries like Cyprus, Spain, Portugal, Ireland and Italy is in the air. "The European Central Bank must provide huge, maybe unlimited, liquidity injection initiatives to ensure banks in all EU countries other than Greece have the necessary liquidity to nip in the bud any confidence loss by depositors," Mifsud wrote.

Matthew Vella is executive editor at MaltaToday.
Martin Micallef
Apparentament din il-problema mhux sa isseh skond il-Euronews ghax skond il-"polls" ha jirbhu l-partiti li jissuportjaw il-"bailouts". Issa naraw jekk hux vera ha jigri hekk.
roderick degiorgio
What is happening in Greece now is the nightmare awaiting other countries.Thanks to all politicians.
Raymond Mintoff
Tonio and Gonzi will make good for the money lost. Even if they suspend their €500 per week rise it will take a couple of hundred of years to make good. The writing was on the wall but we did not heed, it is good that PL did not obstinately refuse to co-operate and work hard in the EU for the people's sake because the situation would have been much much worse.
Monique Vella
Min jikriha irid joqghod ghaliha. Il-hasra hi li dawk il-bosta bravi li dahhluna f'dan l-isqaq ma hargux Ewro centezmu wiehed minn buthom. Viva l-Ewrozone!
mark bonavia
Giovann Demartino: Hawn xi "bully" bhalek, tikkummenta dwar din l-ahbar ? Hekka sibniha l-genna fl-art imwieghda minn EFA, Gonzi, Simon Busuttil & Friends !!1
mark bonavia
Giovann Demartino: Hawn xi "bully" bhalek, tikkummenta dwar din l-ahbar ? Hekka sibniha l-genna fl-art imwieghda minn EFA, Gonzi, Simon Busuttil & Friends !!1
Martin Micallef
U mela ic-cucati ta fuq CMB jew il-Eurovision! Ghadni ma smajt l-ebda naha tara kif ha tara u tilqa f-kaz li tkompli tikber mewga bhal din li jekk tkompli tikber issir tsunami fuqna. Issa ha tibda diska kerha.
Yanika Chetcuti
Where are EFA (busy collected his prizes eh?) and the good Simon now? Nowhere to be seen? Oh bad news is not their thing! Only the feel good feeling! Like say, coming out of the confessional. Yes they would feel good then, after unloading the sacks of lies fed to the Maltese nation favouring the flower blossoming EU. I was just starting to feel good counting my millions, when I was rudely interrupted by a BBC news item extrolling the virtues (eh sorry, I meant vices) of the Greeks not being of the best taxpaying species.
lydon ciantar
How did this happen? Why did we offer Greece so much money? Was our Government presumptuous? Thank you Minister Fenech for putting us in a mess. Viva EU!!
john spiteri
Fenech Adami haqqu zewgt medalji mhux wahda talli dahalna fi sqaq li Alla biss jaf kif se nohorgu minnu shah. Imnalla dhalna fl-ewro qal Fenech Adami ! Irrangajtna!
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