A 400-bln-euro trump card for Greece in troika renegotiation?

Greece?s next government may hold a trump card worth more than $510 billion if it heeds voters? demands to renegotiate its bailout with the European Union.

The nation owes about 400 billion euros ($517 billion) to private bondholders, public bodies such as the International Monetary Fund and European Central Bank and other creditors, according to data compiled by Bloomberg. About 252 billion euros of that?s due to official organizations that used their status to avoid the losses suffered by ordinary bondholders when Greece restructured its debt two months ago.

Greek voters are demanding their leaders renegotiate the terms of rescue packages that have imposed unprecedented austerity on the country since 2010. One potential prime minister, Syriza party leader Alexis Tsipras, has pledged to tear up the EU-led bailout agreement. With Greece owing a sum roughly equal to Switzerland?s economy, the fallout for taxpayers could be calamitous if the country walks away.

?Greece has got some strong cards to persuade them to go easy on austerity,? said John Whittaker, an economist at Lancaster University Management School in England. ?Everyone fears a Greek departure from the euro because they?ll lose money and lose political capital.?

European governments have poured money into Greece since its first rescue was agreed in April 2010 in a bid to keep the country in the euro and prove that monetary union, a symbol of European post-war integration, is irrevocable.

After receipt of a 7.5 billion-euro tranche in March, Greece now owes other countries more than 80 billion euros in bailout funds. The European Financial Stability Facility said 4.2 billion euros of rescue cash will be disbursed to the nation today.

The ECB also stands to lose much if Greece walks away from its obligations. First, the central bank bought about 50 billion euros of the government?s bonds to push down yields and help the nation retain access to the capital markets.

In addition, the ECB?s so-called Target2 system — which tallies trade imbalances between the 17 national central banks using the single currency — indicates that the Bank of Greece owes its counterparts 104 billion euros, according to Whittaker.

The Athens-based central bank has also issued 18 billion euros more banknotes than the size of its economy would indicate as Greeks tuck bills under their mattress or spirit them out of the country, Whittaker said. That would bring Greece?s total liability to the ECB to 172 billion euros.

The ECB ?would have to do a capital call on the rest of the members if there was a default,? said Darren Williams, chief European economist at AllianceBernstein Holding LP in London, which manages about $420 billion. ?It would be a meaningful hit. So, yes, the Greeks do have some leverage.?

European politicians are openly discussing the possibility that Greece will leave the euro after voters flocked to anti- bailout parties in May 6 elections. Five of the seven parties in parliament reject the packages, with Tsipras condemning them as a ?memorandum of barbarity.?

Political parties differ on exactly what terms of the rescue agreement should be renegotiated. New Democracy and Pasok, which have alternated power since 1974 and put in place this year?s bailout, are seeking to ease Greece?s current international-aid obligations.

On the other side of the debate, Tsipras?s Syriza party wants to renege on all Greece?s bailout commitments. As it stands, the composition of the next government is far from certain, meaning new elections may be necessary next month.

?From a political perspective, there is a considerable risk that a left-leaning coalition is formed at the next election with a more explicit mandate to reject the EU/IMF program,? Credit Suisse Group AG economists including London- based Yiagos Alexopolous said in an e-mailed note. Their main scenario is that a national unity government will be formed that changes part of the bailout program but keeps its ?broad thrust? on track, they wrote.

Greece also has 143 billion euros of bills and bonds outstanding, Bloomberg data show, taking total liabilities to 395 billion euros.

None of the numbers include money owed by private debtors including banks. Greek lenders, which are locked out of debt markets, in January borrowed 73.4 billion euros from the ECB to fund their operations, the Bank of Greece said May 3. Lenders typically use government bonds and bills as collateral when borrowing from central banks.