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France Most Threatened by Greek Euro Exit

Greece’s exit from the Euro is looking more likely by the day, and increasing numbers of analysts now believe that that may be the best way forward—at least for the Greeks, if not the rest of Europe. Many countries stand to lose significant investments should Greece bail on the common currency.

A new piece in French daily Les Echos argues that France may have more to lose than any other European nation. This is partially due to its exposure to Greek debt. France currently holds nearly 65 billion euros in Greek debt, on top of a further 37 billion euros held by French companies. If Greece departs the euro and defaults on its debts, French losses could exceed 100 billion euros.

And this doesn’t take into account France’s exports to Greece or French investments in the country, which are valued at more than three billion euros. France retains a large trade surplus with Greece amounting to 1.87 billion Euros.

These figures help explain why President Hollande wants so badly to forestall a Greek exit from the euro. Bailouts may cost Europe a fortune, but the costs of letting Greece go could be far worse — and, from the French point of view, there’s another advantage. Germany will pay more money in to any new efforts to save Greece, but the benefits will flow disproportionately to France. Using German money to support French economic interests is exactly what many French politicians think the EU should be doing; Charles de Gaulle would be pleased.

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  • Anthony

    Regrettably, every shock to the euro must result in casualties; France is attempting minimize further shocks to its financial system – as Joseph Schumpter wrote an economic system cannot do without the ultima ratio…of the hopelessly unadapted.

  • Lorenz Gude

    I know I have to save bullfighting metaphors for the Spanish exit. so i will just say that while the rest of the Eurozone calculates whose ox will get gored by a Greek exit, much more time will pass before it is all worked out than the bald facts would suggest. Hollande’s newness to the job will make the negotiations take longer while the protagonists work out each other’s style. New Greek elections may produce a government willing to go along with some cosmetic version of austerity and keep the whole show on the road for some time to come. Look at Italy were a technocrat was appointed to run the government and implement a version of austerity in Italy.(Bishop X PM Huh?) Greece may get a similar caretaker PM if its constitution can be bent to make such a thing possible. I don’t think it’s over. In short I think the lights all over Europe are burning brightly while the oxen are being counted and the real deal being worked out.

  • Kris

    Lorenz@2: “I think the lights all over Europe are burning brightly”

    Interesting figure of speech.

  • Lorenz Gude

    Kris@3 the reference to the famous comment about the beginning of WW1 just popped up as I wrote the. Comment.. Wikipedia tells me that it was said by Foreign Secretary Lord Grey just after sending an ultimatum that would commit Europe to war. I realize now that I was implying that the current End of Europe meme may be overdone. They need to face that a unified currency is not working out and that the real calculations now need to be done. Neurosis is sometimes defined as false suffering and I think the current crisis in Europe is caused by holding to fixed views not insurmountble obstacles. U

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