One wonders what is really going on behind closed doors. No bank worth its salt is going to willingly accept a loss on Greece’s debt and then continue to buy the country’s bonds just to please Germany and France but mostly Germany, which is the economic leader of Europe. One bank chief was even caught on record suggesting that he had no objection to buying such bonds IF — and this is the point — Germany is willing to co-sign the loan and agree to pay for Greece if Greece defaults.
All bankers know that Germany would never default on a loan. They’d rather be split up into pieces again. They learned the lesson the hard way in the last century after the Weimar Republic went bad in the 20’s and hyper-inflation ruled. But Greece is a Balkan country and politically disuniied in a way that Germany never was. They are not only willing to default, they are about to do so.
The German taxpayers are going to have to clean up the mess sooner or later. It might as well be sooner. And they should do it before July 3. All this shadow boxing won’t do any good. As Fitch Ratings Agency warns in the Wall Street Journal article of Thursday, June 23, 2011, “Bailout Needs Banks’ Help”, “Even a voluntary rollover (gentlemen’s agreement) could be called a default.”