Add this to the list of reasons German taxpayers are so unhappy about having to lend money to Greece to alleviate its debt crisis: In effect, they already have.
Germany's financial institutions hold some 28 billion euros, or $37 billion, in Greek bonds, according to estimates by Barclays Capital, extrapolating from International Monetary Fund data.
Germany's regulators and many of its banks do not disclose precise figures, but an informal survey on Wednesday of the largest banks indicates that about half of that debt — rated "junk" by Standard & Poor's since Tuesday — appears on the balance sheets of institutions that are owned or controlled by the German government.
And so Germany's exposure to Greek debt already exceeds, by far, the $11 billion the country would lend to Greece as part of an initial European Union plan to help the country avoid default on its debt — though not the $32 billion that may eventually be needed from Germany.
One institution, Hypo Real Estate Holding, carries $10.5 billion worth of Greek debt on its books. After a bailout last year, German taxpayers own Hypo Real Estate.
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Germany's direct exposure to Greek debt underscores how the country's problems are very much Europe's problems. "It's not just a question of paying for Greece's luxury pensions. There are intrinsically strong German interests as well," said Alessandro Leipold, a former acting director of the IMF's European department.
Greece's fiscal crisis, beyond threatening the credibility of the euro and the stability of the European economy, also could hit government budgets in a very direct way, potentially requiring them to pump even more money into banks they have already rescued.
German political leaders have rejected talk of restructuring Greek debt in a way that would force banks to share some of the pain, von Hagen said, because they know that their taxpayers would ultimately get the bill.
Germany is not the only European country that is exposed to Greek debt. France is Greece's biggest creditor, with $67 billion in holdings, including $9 billion held by the Bank of France, according to Barclays. Italy holds $27 billion in Greek paper, followed closely by Belgium, the Netherlands and Luxembourg.
American banks held about $16.6 billion in Greek debt at the end of 2009, according to the most recent data from the Bank for International Settlements, making their potential liability small by comparison.
The European Central Bank also holds Greek debt, which it accepts as collateral when lending to euro-area banks. One question is what the central bank would do if the major ratings agencies continue to downgrade Greek debt, making the bonds ineligible as collateral.
