GREECE, WHO'S EXPOSURE IS IT ? - It's not the direct exposure, it's the indirect exposure and the implications of an unruly default that I would be worried about. French and German banks bought Greek bonds, and they took out insurance against default. Who did they take out that insurance with? The US and UK banks. There has to be a loser – who's the loser?" A fresh bailout for Greece will go ahead on condition that its parliament votes for new austerity and reform programmes. It is expected to total about €110bn, with about €30bn coming from bondholders, €30bn from privatisations and the rest from eurozone members and the IMF. Persuading the private sector to play a part is seen as crucial to the chances of averting a Greek disaster and was a key part of German chancellor Angela Merkel's pitch in Brussels. Without this, EU leaders fear Greece will default, triggering payouts on a web of complex financial insurance products and creating chaos in world markets as investors struggle to work out who owes what. Some analysts fear default could create a "Lehman moment", like the aftermath of the collapse of the giant US investment bank in 2008, when investors lost confidence in each other and the world financial system froze up. At the inaugural press conference for the Bank of England's new financial policy committee, governor Sir Mervyn King described the deteriorating situation in the eurozone as a "mess" and warned that, although Britain's banks own a relatively small number of Greek bonds – about £3bn worth – there could be dramatic knock-on effects if a default resulted in a loss of confidence throughout the global financial system. That gives Treasury officials a strong incentive to ensure that the banks sign up. Without a voluntary agreement from investors, the powerful credit ratings agencies will declare that Greece has defaulted, spreading chaos. US Federal Reserve governor Ben Bernanke last week urged European governments to resolve the Greek crisis or risk threatening "the European financial system, global financial system, and European political unity".
Access Investments-Building Awareness - European Union-ROMANIA
Sunday, June 26, 2011
GREECE, WHO'S EXPOSURE IS IT ? - It's not the direct exposure, it's the indirect exposure and the implications of an unruly default that I would be worried about. French and German banks bought Greek bonds, and they took out insurance against default. Who did they take out that insurance with? The US and UK banks. There has to be a loser – who's the loser?" A fresh bailout for Greece will go ahead on condition that its parliament votes for new austerity and reform programmes. It is expected to total about €110bn, with about €30bn coming from bondholders, €30bn from privatisations and the rest from eurozone members and the IMF. Persuading the private sector to play a part is seen as crucial to the chances of averting a Greek disaster and was a key part of German chancellor Angela Merkel's pitch in Brussels. Without this, EU leaders fear Greece will default, triggering payouts on a web of complex financial insurance products and creating chaos in world markets as investors struggle to work out who owes what. Some analysts fear default could create a "Lehman moment", like the aftermath of the collapse of the giant US investment bank in 2008, when investors lost confidence in each other and the world financial system froze up. At the inaugural press conference for the Bank of England's new financial policy committee, governor Sir Mervyn King described the deteriorating situation in the eurozone as a "mess" and warned that, although Britain's banks own a relatively small number of Greek bonds – about £3bn worth – there could be dramatic knock-on effects if a default resulted in a loss of confidence throughout the global financial system. That gives Treasury officials a strong incentive to ensure that the banks sign up. Without a voluntary agreement from investors, the powerful credit ratings agencies will declare that Greece has defaulted, spreading chaos. US Federal Reserve governor Ben Bernanke last week urged European governments to resolve the Greek crisis or risk threatening "the European financial system, global financial system, and European political unity".
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