Malta has highest exposure to Greek eurozone exit at 4.3% of GDP

Malta is the EU's most exposed of member states to a Greek exit from the eurozone, risking some of the biggest side-effects from a so called 'Grexit' if on 17 June Greek voters back parties who want to seek renegotiated terms on the EU-IMF bailout.

Malta granted €56 million in bilateral loans to Greece and another €56 million was guaranteed in a second bailout through the European Financial Stability Facility. A possible Greek exit will mean some, if not most of these loans will be lost once Greece decides to default.

Japanese investment bank Nomura tagged Malta's exposure as a percentage of its GDP at 4.3%, the highest of all EU states, followed by Estonia (4.2%), Slovenia (3.9%), and Slovakia (3.7%). The EU state with the lowest exposure is Luxembourg at 1.8% of its gross domestic product.

Whether Malta can afford the haircut on the Greek repayment is another matter: embattled countries like Spain, Portugal and Ireland have billions loaned out to Greece. Spain and Italy are the fourth and third largest lenders respectively, with €30 billion and €46 billion loaned out.

EU leaders were warned late last week in Brussels to prepare for a possible Greek exit from the eurozone.

If the Greeks back the parties seeking new terms on the loan repayments, in a bid to ease an austerity programme that has crippled a nation suffering high unemployment, the likelihood is that European creditors like Germany could stop the loan disbursements to Greece.

The theory is that without cash to pay out even civil service salaries, Greece will have to turn to its old currency - the Drachma - to pay its employees, the first step to an eventual 'Grexit' from the eurozone by 2013.

Already €73 billion in disbursements to Greece have taken place since May 2010. In March, eurozone finance ministers approved a second programme for €130 billion until 2014, including €28 billion from the IMF, to be released according to Greece's performance.

Financial consultant Alfred Mifsud, formerly Mid-Med Bank chairman, wrote in his blog that it was unlikely that the EU was not preparing a contingency plan for the Grexit.

While Greek default appears unavoidable, the risks of contagion to countries like Cyprus, Spain, Portugal, Ireland and Italy is in the air. "The European Central Bank must provide huge, maybe unlimited, liquidity injection initiatives to ensure banks in all EU countries other than Greece have the necessary liquidity to nip in the bud any confidence loss by depositors," Mifsud wrote.