The risk of Greece’s turmoil spreading to the rest of the euro zone is low, a senior official at ratings agency Standard and Poor’s said in a German newspaper interview on Wednesday.
“Greece’s risk premium has drastically increased again recently but the panic hasn’t leapfrogged over to other former crisis countries. The risk of contagion doesn’t seem to actually be that big,” Moritz Kraemer, S&P’s chief sovereign ratings officer, told Boersen-Zeitung.
While he said the risks associated with a country leaving the euro zone were difficult to foresee, he suggested that the euro zone could cope if Greece quit the bloc.
“Greece’s economy is very weak and its links with the rest of the euro zone are even smaller than the value-added suggests,” Kraemer said, adding that the danger of contagion was therefore smaller now.
He said that if funds lent to Greece had to be written off, this would not necessarily have a negative impact on the credit ratings of its lenders.
“Contrary to public perception, the extent of liability is not that high at all in proportion to the creditors’ economic strength,” he said, adding that Berlin had poured far more money into rescuing German banks during the global financial crisis than it would if it lost all of the money lent to Athens.
Kraemer said the lack of impact of any write-down of Greek debt would strengthen the creditors’ position in negotiations.
But he said leaving the euro zone would be “devastating” for Greece, especially as it is more dependent on imports than any other euro zone country and would not be able to finance all of the goods it needs to buy from abroad such as energy, medicines and food with its own currency.
“The population might have to go through all of the deprivation it thought it had already put behind it,” he said. [Reuters]