Who benefits most from the euro? Who loses the most of Greece defaults on its debts?

Franz Kössler writes in "Zu elitär, um sich selbst zu schützen: Europa in der Krise" Falter print edition 20/2011 (18.05.2011) what is clearly so, "Germany has the most strongly profited from the common currency [euro]" ("... Deutschland von der Gemeinschaftswährung am stärksten profitiert hat").

In the same issue, the chief economist of Bank Austria, Marianne Kager, writes about "Der Ausweg aus dem griechischen Drama" (the exit from the Greek drama). She observes accurately that the brutal austerity conditions that the EU is demanding of Greece has resulted in the Greek economy shrinking, with the result that the deficits are growing even as the bond markets hammer Greece's national credit with high interest rates. She writes that if Greece actually fulfills the EU conditions - which are understandably producing mass protests against them among the Greek people - it would not only hinder Greece's economic recovery, but they would also be "sozialpolitisch unverträglich" (social-political unbearable).

But without pointing specifically to the fact that large banks in Germany and France are heavily exposed to Greek public debt - i.e., they hold a lot of it - she warns that it would be a disaster from Greek banks if Greece eventually writes off some of its debt. Which it will eventually have to do, although she argues they don't have to. She as the chief economist for Bank Austria makes the case for EU "Brady bonds" that will bail out the banks and their stockholders for their bad loans to Greece.

But neither Germany nor France nor Greece is limited to the choice of letting their banks completely collapse or have the public indemnify them from the consequences of their own bad business decisions. They can save the bank institutions without saving the existing management or the stockholders.

If I were a Greek, Spanish, Portugese or Irish citizen, I would be saying, let the big banks and their stockholders eat their losses. If some of the banks have to be put into receivership and reorganized, so much the better. Hopefully the new management won't be so reckless and destructive.

Tags: eu, european union, greece