Markets overreacting to Greek crisis: German economist

The financial markets are overreacting to the Greek crisis and a bailout of Greece by the EU would cost less than Germany paid to rescue its Hypo Real Estate bank, a top German economist said yesterday.

"The markets are currently taking a very one-sided view of things," Deutsche Bank's former chief economist Norbert Walter said in an interview with the Austrian daily Der Standard.

"Greece is being pilloried. The market reactions are generating problems, which are primarily built on speculation but which then turn into reality," Mr Walter said.

"Hypo Real Estate cost Germany more than €100 billion. Greece is therefore smaller than what we've already experienced," Mr Walter said.

Hypo Real Estate (HRE) collapsed in late 2008 amid a global crisis owing to investment mistakes made by its German-Irish subsidiary Depfa.

The bank received a rescue package worth a total of €50 billion from a consortium that included the federal government, the central bank and private institutions.

The property lender has also benefited from access to a total of €102 billion in state loan guarantees.

Another leading German economist, Martin Huefner, told the daily Salzburger Nachrichten that Berlin, in particular, was managing the Greek crisis "miserably".