As capital flight has driven up Greek payment obligations to 173 percent of its GDP, the German think-tank ifo Institute argues in favour of a default and exit from the eurozone.
“If Greece chooses to stay in the Eurozone, it will have to accept a third liquidity injection, a formal default, an exit from the eurozone with subsequent devaluation would be prefereable in order to stimulate Greece’s real economy” argues ifo president Hans-Werner Sinn.
“The country is at the brink of default and continues to be refinanced with public money. This is a mere delay of the bankruptcy, which allows investors to exit the country at the expense of the international community of states” he argues.
According to ifo estimates, the potential losses of a Greek default would be predominantly born by Germany, France, Italy and Spain. Taking into account the losses from previous programmes such as EFSF and ESM, the German state would lose €84.7bn in the event of an exit and default, compared to €85.2bn in the event of Greece staying in the eurozone and defaulting.
Figures are similar for France, which would lose 64.4 in case of a default and exit, compared to 65.0 in case of Greece staying, and Italy, which would lose €54.4bn vs €56.8bn.
The ifo figures are based purely on the costs of previous liquidity injections and do not factor in the potential effects on a Greek default on eurozone bond yields.