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Eurozone Liquidity: PIGS Take the Lion's Share

Here's the disturbing headline statistic: Portugal, Ireland, Greece, and Spain have sucked out 93 percent of the total liquidity taken from the ECB and other central banks.

Euros at an angle
Thomas Northcut | Photodisc | Getty Images
Euros at an angle

The Financial Times reports, in a disconcerting Alphaville blog post today, the sordid details. Basically, the net capital usage of eurozone member states is seriously out of whack. In fact, Alphaville has republished a data table from CreditSights that sums up the problem with and almost devastating simplicity.

Why the phrase 'devastating simplicity'?

Well, credit flows through a highly complex network of European national central banks—embedded within an overarching framework of a superordinate European Central Bank—are, of course, complicated business. The average voter isn't tracking the policy nuances or the functional mechanics of such a system. Nor, one might reasonably argue, should they.

But the triumph of democracy is this: Give the average citizen accurate information and they tend to make responsible decisions.

And therein may lie the challenge in holding together the European Union: The numbers illustrate a point that is painfully clear to anyone who wishes to see.

For example, the following statistics, from a sampling of nations who are net takers of liquidity from Eurosystem central banks: Ireland has taken out €130 billion, while only placing €14.6 billion, leading to a net usage of €115.4 billion. Greece has taken €94.5 billion, while placing €9.1 billion, for a net usage of €85.4 billion. Spain has taken €75.3 billion, placed €20 billion, for a net usage of €55.3 billion. Portugal has taken €40 billion—and only placed €.1 billion—for a net usage of €39.9 billion. The totals, for the eight countries that are net takers of liquidity are as follows: €473.6 billion in total liquidity taken, €156.1 billion in total liquidity placed—for a total net usage of €317.4 billion.

On the other side of the ledger, for the four countries who are net providers of liquidity to Eurosystem central banks, Austria seems to have gotten the rawest deal: Austrians took €7.2 billion in liquidity and placed €35.5 billion in liquidity—for a net usage of negative €28.3 billion of liquidity.

Eurozone politicians are perhaps awaiting the reckoning with bated breath: Voters don't require a PhD in economics to question the viability of such a system at the ballot box.

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