If Greece defaulted and left the euro, about €177 million of Maltese money would be at risk, Finance Minister Edward Scicluna has said.

The amount is the single largest impact Malta is likely to experience if a ‘Grexit’ (Greek exit) becomes a possibility after tomorrow’s meeting of eurogroup finance ministers.

Finance Minister Edward Scicluna.

Malta gave Greece a loan of €50 million as part of a €110 billion bailout package to Greece offered by the EU and the International Monetary Fund in 2010.

The island also issued €127 million to the European Financial Stability Facility, a financial instrument created in the wake of the first bailout programme, as guarantees for further Greek loans.

Prof. Scicluna said that if Greece viewed its exit from the euro as a means to turn things around, at some point it would have to go to the market to raise money.

“The impact from a Grexit will not be immediate, because most of the loans were renegotiated over a longer time, but for Greece to raise money in the market it will need to solve outstanding issues with debtors, including Malta.”

Patience has worn thin with Greece now that last-ditch technical talks to find a solution have failed to produce results.

Greece’s far left government wants looser conditions for bailout money as it tries to fulfil an electoral pledge to curb austerity. It has so far failed to reach an agreement with its creditors.

For Greece to raise money it will need to solve outstanding issues with debtors, including Malta

Prof. Scicluna has warned that the ball is firmly in the Greek court to find a solution at tomorrow’s meeting. Political posturing would not yield results, he added.

“If the Greeks realise that the consequences of a default are too high to shoulder they might retreat from the brinkmanship we have witnessed over these past few months and come up with an acceptable proposal,” he said.

The antics adopted by Greece during protracted talks have frustrated eurozone finance ministers and top EU officials who were sympathetic to the Greek cause. “Donald Tusk, Jean Claude Juncker and Martin Schulz all understood the Greek position and tried to broker an agreement but even they became frustrated. Greece has lost its friends,” Prof. Scicluna said.

Talk of a Grexit gained ground after Sunday’s failed talks, provoking a debate on the future of the euro if Greece is cut loose.

Central Bank of Malta governor Josef Bonnici believes the bigger impact from a Grexit would be on neighbouring countries like Bulgaria, where a major part of the banking sector is made up of Greek subsidiary banks.

“Malta is not so exposed to Greece in terms of trade and banking assets.

“What we have is government exposure through the loans issued as part of the bailout programmes,” Prof. Bonnici said.

He insisted the biggest burden would fall on Greece itself.

“The banking system in Greece is facing an outflow of funds and the value of assets is falling.”

Prof. Bonnici said the eurozone and the banking system were a lot more prepared,compared to the last crisis.

“Contagion within the eurozone is significantly less likely now.”

He noted that the European Central Bank was in the process of quantitative easing – releasing cash to stimulate the economy – and this would provide a significant cushion in the wake of a Grexit.

kurt.sansone@timesofmalta.com