Josef Ackermann Says Greek Default Would Be ‘Playing With Fire’

The economic and political consequences of Greece defaulting instead of reaching a voluntary debt-restructuring deal are being underestimated, Deutsche Bank AG (DBK) Chief Executive Officer Josef Ackermann said.
“Default risk is much higher than what people normally take into account,” Ackermann said today in an interview at the World Economic Forum in Davos, Switzerland.
“You see already that some markets are nervous about certain countries,” he said. “That is playing with fire if you think that a default will have no impact.”
As Greece’s creditors continue negotiations with the country’s government as well as the International Monetary Fund, European Union, and European Central Bank over the terms of a restructuring, some investors and financiers are downplaying the consequences of a default.
“They are underestimating the collateral damages and they are underestimating the risk of contagion,” Ackermann, 63, said today. “If we have a default in the euro zone going forward, this will reduce somewhat the trust and confidence in the euro system and so, in that sense, we should do everything, also from a historic and political perspective, to prevent a default.”
Market participants remain sceptical that Greece will be able to make a 14.5 billion-euro ($19.2 billion) bond payment in March. In a Bloomberg Global Poll of 1,209 investors released this week, 93 percent of respondents said they expect Greece to default.
Such a failure would damage direct investments that banks and companies have made in Greece while also hitting the firms because of their exposure to its broader economy, Ackermann said today. The fallout would affect a claim of about 100 billion euros that the European Central Bank payment system has against the Greek central bank, he said.
Deutsche Bank, Germany’s largest lender, has 874.7 million euros of total debt exposure to Greece, according to figures released by the European Banking Authority in London in December. The bank at that time had sold 4.42 billion euros of credit-default swap protection on Greece and had purchased 4.32 billion euros of CDS protection, the data showed.
Ackermann is immersed in the Greek debt negotiations as chairman of the Institute of International Finance, which represents banks, fund managers and other private-sector Greek creditors in the debt-restructuring talks. He said today that he wants policy makers at the table, including the IMF, EU, ECB and Greek government, to appoint a single negotiator to ease the process.
(source: Bloomberg)