The ECB’s exposure to Greece is not huge and ultimately lies with the euro-zone governments that would have to recapitalise it. But a Greek default to the ECB would be a serious blow to the Bank’s credibility that could limit its ability to control inflation or support stressed bond markets in future. The ECB is exposed to a Greek default through two direct channels. Its holdings of Greek government bonds purchased during the Securities Markets Programme (SMP) have a book value of €18bn, or 0.2% of euro-zone GDP. Chart shows that €6.7bn worth matures this summer. And its lending to Greek banks through refinancing operations was €38.5bn (0.4% of GDP) in April. So in the event of a sovereign default and associated collapse of the banking sector, the ECB could suffer losses of up to €56.5bn, wiping out its subscribed capital of €10.8bn, but not its total capital and reserves of €96bn, notes Capital Economics.
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