Article

2010-04-23 Economy

Euro suffers as Greek credit takes another dive

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Posted by lotp 2010-04-23 00:00|| || Front Page|| [1 views ] Top

#1 Something significant is at risk here, but I've yet to figure out what it is. Some of the usual suspects have popped up again. From the Electronic Telegraph: "It is understood that EU officials are exploring formulae that would avoid triggering CDS default contracts, which could cause big losses for European banks that issued the derivatives." How anyone could have thought it a good idea to issue a CDS on Greek debt is beyond me.

Posted by Anguper Hupomosing9418 2010-04-23 00:30|| 2010-04-23 00:30|| Front Page Top

#2 "Euro suffers" words to warm the cockles of my heart.

Posted by g(r)omgoru 2010-04-23 06:04|| 2010-04-23 06:04|| Front Page Top

#3 The Greek debt situation is not unlike the subprime mortgage situation that triggered the GFC.

A Greek default will leave banks and others with huge losses on bonds and CDS's. Banks would refuse to deal with other banks for fear they may go under.

The whole financial system freezes up the way it did in the GFC. More massive bailouts of banks with taxpayers money.

A Greek default would cause a sharp economic contraction across Europe. Falls in government revenues, as well rising cost of borrowing, forces more countries into default. Governments run out of money to bail out banks and many/most go bust.

A banks' capital ratio is about 7%. So if 7% of their loans default and are unrecoverable, the bank is bankrupt.

Posted by phil_b 2010-04-23 11:42|| 2010-04-23 11:42|| Front Page Top

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