United States Taxpayers Could Be on the Hook for Greece

Here's another reason why U.S. taxpayers should be paying attention to the financial meltdown of Greece and the basket cases of Spain, Portugal and Ireland, which aren't so far behind. The EU-IMF bailout is now expected to be worth $160 billion over three years.

As Zerohedge points out, U.S. taxpayers may on the hook for loans to Greece. The U.S. funds the IMF, whose loans to Greece are junior to existing debt, and essentially will be the last credits to be repaid in the event that Greece defaults. The original citation comes from Euro Intelligence, which says:

• The loans will be junior to those of the existing bondholders. These are three extremely tough pills to swallow for MPs who were preparing to vote on a much smaller package of super-senior loans with a haircut from the bondholders. The opposition parties announced yesterday that they would reject the package on the grounds that Merkel had misled the German people throughout this entire process. And there is also opposition within the coalition about the size of the plan.

The European banks that lent too much money to Greece will come out whole, just as Goldman Sachs came out whole in the AIG bailout. The risk will fall, once again, to U.S. taxpayers. So far, their investment in the bailout of U.S. banks has avoided disaster, and much of the money has been repaid. Whether Greece will be as reliable is in doubt. Greece is hardly a stable political entity.