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Greek Debt Crisis: Lehman 2.0?
Carried over to Monday. AoS.According to estimates by The Economist, foreign banks' exposure to Greece, Portugal and Spain combined comes to 1.2 trillion. European banks have lent most of this. German banks alone account for almost a fifth of the total. (Table 2) Realizing failure to act risks a financial meltdown, German finance minister Wolfgang Chasuble pleaded with his people and told Der Spiegel that, "We cannot allow the bankruptcy of a euro member state like Greece to turn into a second Lehman Brothers...Greece's debts are all in euros, but it isn't clear who holds how much of those debts. The consequences of a national bankruptcy would be incalculable." Worries about Greece's widening deficit and has contributed to a 7.2% slide in the euro this year and sent ominous ripples across a stagnant European economy. The proposed pact would cost EU members--almost all of them facing onerous debts already--additional 30bn ($40bn, £26bn) of debt. More bailouts could be expected with other highly indebted PIIGS nations waiting in the wing. This no doubt will damage the euro's prestige, and will inevitably increase their debt burden, and further weaken the euro. Eventually, Greece might still default and the entire euro zone will likely face higher interest spread, and so the vicious debt & risk cycle would commence again. Posted by: tipper 2010-04-26 |
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