Bluff of the Day: Germany Warns "Greece is No Longer of Systemic Importance For the Euro"

In the obvious bluff of the day, Euro zone No Longer Obliged to Rescue Greece, Merkel Ally Says.

Actually, the eurozone was never obliged to rescue Greece, and in fact did not rescue Greece. Rather the EU and Troika rescued European banks holding Greek bonds.

Here's the actual bluff.

In an interview with Rheinische Post newspaper published on Wednesday, Michael Fuchs also said Greek politicians could not now "blackmail" their partners in the currency bloc.

"If Alexis Tsipras of the Greek left party Syriza thinks he can cut back the reform efforts and austerity measures, then the troika will have to cut back the credits for Greece," he said.

"The times where we had to rescue Greece are over. There is no potential for political blackmail anymore. Greece is no longer of systemic importance for the euro."

Blackmail Potential

Curiously, there was little potential for blackmail years past when Greece ran a primary account deficit (Greece needed money from Europe to stay afloat), but now Greece has a tiny current account surplus (not counting interest payments).

Countries with current account surpluses are not dependent on foreigners to finance debt. This makes it all the more likely Greece can tell the Troika "go to hell".

Of course, Tsipras has made all kinds of pledges that would kill the surplus if carried out, but since when do politicians keep promises?

More than likely a default would wreck the Greece economy, but so does interest on €245 billion in "bailouts" for years if not decades to come. Tsipras may easily decide he has nothing to lose.

Ironically, if his economic proposals were better, Greece would indeed have everything to gain and nothing to lose by cramming this straight down the EU's throat.

Eurozone Financial Stability Contribution Weights

Country	Guarantee Commitments (EUR) Millions	Percentage
Austria	€ 21,639.19	2.78%
Belgium	€ 27,031.99	3.47%
Cyprus	€ 1,525.68	0.20%
Estonia	€ 1,994.86	0.26%
Finland	€ 13,974.03	1.79%
France	€ 158,487.53	20.32%
Germany	€ 211,045.90	27.06%
Greece	€ 21,897.74	2.81%
Ireland	€ 12,378.15	1.59%
Italy	€ 139,267.81	17.86%
Luxembourg	€ 1,946.94	0.25%
Malta	€ 704.33	0.09%
Netherlands	€ 44,446.32	5.70%
Portugal	€ 19,507.26	2.50%
Slovakia	€ 7,727.57	0.99%
Slovenia	€ 3,664.30	0.47%
Spain	€ 92,543.56	11.87%
Eurozone 17	€ 779,783.14	100%

The above table from European Financial Stability Facility

I posted the above table on Monday in Snap Elections in Greece; 3-Year Bond Yield Tops 12%; Potential Cascade! Who Has the Upper Hand?.

Here's a second table I created today to put a potential €245 billion default into proper perspective based on percentage liabilities.

Responsibility in Euros

Country	Percentage	Greek Debt Responsibility
Austria	2.78%	6.79875
Belgium	3.47%	8.49317
Cyprus	0.20%	0.479465
Estonia	0.26%	0.62671
Finland	1.79%	4.3904
France	20.32%	49.79527
Germany	27.06%	66.308515
Greece	2.81%	6.88009
Ireland	1.59%	3.88913
Italy	17.86%	43.75651
Luxembourg	0.25%	0.611765
Malta	0.09%	0.221235
Netherlands	5.70%	13.96451
Portugal	2.50%	6.12892
Slovakia	0.99%	2.42795
Slovenia	0.47%	1.151255
Spain	11.87%	29.076355
Eurozone 17	100%	245

The idea that Greece is responsible to cover its own default is of course ridiculous, so mentally spread Greece's €6.88 billion liability to the other countries.

Italy's responsibility would rise by a little over €1 billion while Spain's liability would rise by a little under €1 billion. Germany would need to pick up about €2 billion, and France about €1.5 billion etc.

Where is Spain going to come up with €30 billion? Italy €45 billion? France €51 billion?

The simple answer is they aren't. So, does the ECB print the money in violation of rules and pass it out?

If not, who's bluffing whom regarding "systemic importance" of Greece?

The irony of the day is that Greece was no systemic threat to the eurozone until the Troika foolishly threw  €245 billion at Greece hoping to prevent a default.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com