Mark Hoban (Con): “The UK’s exposure to Greece is relatively small, with bank exposure at $4 billion.”

Jack Straw (Lab): “Will the Minister first check his figures? Figures in the Financial Times, citing Moody’s and Reuters, suggest that the exposure of British public and private sector banks to Greek debt is €13 billion.”

House of Commons, 21 June 2011

With the future of the Greek economy seemingly in the balance as it awaits a further bailout by the Eurozone and IMF, and with its Government facing a vote of confidence, calls for the country to default on its debt and recouple from the Euro have been growing.

This morning, Conservative MEP Daniel Hannan told the Today programme that Greece's participation in the European single currency had run its course. Yesterday, former Labour Foreign Secretary Jack Straw caused a stir by going a step further, telling the Commons that “the euro in its current form is going to collapse.”

But how worried should UK citizens be of the financial strife on the continent? Mr Straw suggested that the problem might be a bigger worry for the UK economy than City Minister Mark Hoban was letting on, placing British exposure to Greek debt at €13 billion, rather than $4 billion.

So why is there such a divergence in the estimates, and which better represents the true picture?

Turning to Mr Straw's figure first, the Financial Times article cited by the former Foreign Secretary reports that UK banks could lose as much as $13.1 billion in the event of an Hellenic default. While the figure given by Mr Straw does accurately reflect that in the FT, he does seem to have muddled his currencies, reporting it in Euros rather than dollars. This has the effect of slightly inflating the size of the exposure.

The FT's figure is turn is backed by information provided by Thomson Reuters datastream, the Moody's credit rating agency, and the Bank of International Settlements (BIS). Indeed BIS also records that UK-owned banks' claims on Greek debt totals $13.14 billion.

Mr Hoban's estimate was, as he noted, “provided by the Bank of England” as part of the data assembled as part of its Bankstats series. This estimate is supported by research from the investment bank UBS.

The difference between the two figures stems from slightly different interpretations of what is meant by “Greek debt”.

Whereas the $4 billion captures only the exposure of UK-owned banks to Greek sovereign debt (that issued by the Government itself), the $13.1 billion refers to the claims these banks have on both public and private debt (and therefore includes inter-bank lending).

Which figure better represents the risk to the UK economy is a matter of debate. While a default by the Greek government might only directly hit investors in government bonds, the impact on the wider economy cannot be precisely predicted, and may eventually involve the collapse or devaluation of private sector investments too.

As Emmanouil Schizas, a commentator on the Greek economy told Full Fact, “it's probably a fair assumption that UK banks would lose a lot of money on their Greek bank exposure as well as a direct result of a Greek default, as Greek banks tend to be quite heavy on Greek bonds.”

On the other hand, the distinction itself may be slightly artificial, as there is a good deal of uncertainty about how any sovereign default may be structured. As Mr Schizas told us: “Sovereigns don't generally default on all of their debt in one go, and the default levels discussed for Greece are well below 100 per cent.”

So while both Jack Straw and Mark Hoban can both point to data to substantiate their figures, the jury remains out on which gives the fuller picture of the risk to the UK economy.