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Nowotny: Greek Haircut for ECB “No Issue”

Published: October 29, 2012; 16:38 · (Vindobona)

The governor of Austria´s National Bank (OeNB) Ewald Nowotny thinks that ECB would not participate in a haircut.

Nowotny: Greek Haircut for ECB “No Issue” / Picture: © Vindobona.org

A haircut which would affect public creditors is no issue for ECB, Nowotny says. This would be a burden for the taxpayers. Moreover, a haircut would mean a direct financing of a Eurozone member country by ECB.

Nowotny underlined that ECB is independent and that the decisions taken by the Council are not influenced by political pressure. According to the governor of OeNB, Greece needs simply more time to restructure its public finances. Until now, Greece received aids of € 240bn. The Spanish package has a size of € 100bn, which is followed by Ireland (€ 85bn) and Portugal (€ 78bn). Cyprus may receive up to € 10bn.

For Austria, a Greek haircut would mean that Austrian taxpayers would lose about € 1.55bn at least. The Brussels-based think tank CEPS states that Austria would have to bear costs of € 10.9bn in case of a Greek exit.

At the moment, Austria´s bilateral aids for Greece amount to € 1.5bn. In addition, Austria provided guarantees to EFSF and would have to inject new capital into ECB in case of a Greek exit. Moreover, there is still an exposure of Austrian banks. Last year, the publicly owned KA Finanz recorded € 423m in write-offs of Greek CDS. The exposure in Greek CDS still amounts to € 522.8m. As a result, KA Finanz expects an additional burden of € 423.6m. In March, Finance Minister Maria Fekter said that KA Finanz still faces risks of € 400m. In total, Austria would lose about € 10.9bn in case of the Greek exit.

The Austrian economist Christian Keuschnigg argues that Greece needs a haircut. Keuschnigg does not think that Greece will be able to repay its debt otherwise. The only question would be how big the haircut will be. “A haircut for the public sector, which reproduces the debt reduction of the private sector would enhance the probability of a successful restructuring substantially.” Keuschnigg says. Keuschnigg´s predecessor Bernhard Felderer explained that the Eurozone will have to write off its Greek exposure. „We will not get any money back.“ Felderer said already in June.

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