Irish also get heavy with Brussels
For a week now, the world has been distracted by the killing of a washed-up terrorist. But given the depth of Greek financial problems, it should come as no surprise that the Athenian Government is desperately seeking a way out from a currency it cannot devalue.
The Wall Street Journal reported last night that Europe’s debt crisis has returned full circle to the problem that started it over a year ago: how to save Greece from default as a result of its mad public spending policies under the previous Athens Government. In obvious expectation of a default, Standard & Poor yesterday cut Greece’s credit rating by two notches, leaving it at ‘B’. Quite why any lender would proffer funds to Greece even at sky-high yield levels is beyond me, but financial markets are rarely sane these days.
The Greek government has been steadily falling behind on its debt reduction targets, and eurocrat sources expect the struggling country to need at least €25 billion of extra financing for 2012. But such is the unwieldy – and, frankly, dilatory – attitude of Brussels functionaries, any accord on the controversial issues surrounding the latest Greek crisis will take months to reach. Athens has at best weeks to sort things out.
I understand the secret Luxembourg session was a desperate attempt to bypass normal EU procedures and fast-track some form of solution. In fact, the leak about the meeting hasn’t terrified anyone that much: most traders I spoke to have long regarded the exit as a strong probability.
In Germany, opposition to aiding Greece is rising in the Bundestag and the electorate. The Slog understands that privately, German ministers and bankers would like to find a default-avoiding solution to sell to eurozone member countries; but this is a toxic subject in German domestic politics. Fritz in der Strasse is as yet unwilling to grasp that Greek default would almost certainly be the catalyst for another international banking crisis….but this time on a far bigger scale than the one which doomed Lehman Brothers in 2008.
No wonder Seibert’s denial of the Spiegel story was so shrill.
The degree of exposure of EU banks to Greece, Ireland, Portugal and Spain is still a little understood topic among ordinary voters. But the insane policy of interlinked global banks means that, realistically, the chain-reaction set off by a major European bank over-exposed to sovereign debt is far more important than that sovereign State’s default per se. If Greece had been propped up by one Silesian bank, there would be no problem. But that is very far from being the case.