‘Size Matters’ as EU Weighs Up Greek Rescue Bill: Chart of Day

Feb. 17 (Bloomberg) -- Europe may need to stump up as much as 320 billion euros ($441 billion) if it decides to bail out Greece because it would open the door to rescuing other countries in financial distress, according to BNP Paribas.

“To come up with a bailout plan that would be reasonably certain of success, it would have to cover all the most likely candidates, and it would have to be big,” said Paul Mortimer- Lee, global head of market economics at BNP in London. “Size matters when you are trying to scare off speculators and to comfort nervy bondholders.”

The CHART OF THE DAY shows BNP’s estimates of the aid packages that would be required for Greece, Portugal, Spain and Ireland. Mortimer-Lee used 20 percent of gross domestic product as a rule of thumb, based on recent International Monetary Fund packages. In comparison, the rescue of insurer American International Group Inc., the biggest U.S. bailout, cost $182 billion.

European leaders last week pledged to guarantee the stability of the euro region, though they stopped short of naming specific measures to help Greece. Spanish and Portuguese bonds have declined on concern those countries will also struggle to cut their deficits.

“No wonder the only support so far given to the periphery has mainly been moral,” Mortimer-Lee said. “Talk, as they say, is cheap. Any convincing bailout will not be.”

To contact the reporter on this story: Frances Robinson in Frankfurt at frobinson6@bloomberg.net

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net