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Greek debt--held by German and French banks--is rolling over to Greek banks with every new issue

Where do you see evidence of this? Do you mean the Greek private banks or the Greek Central Bank?

And the Greek bank is allowed to keep buying because its Greek bonds are cleared as assets through the ECB.

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Tue Apr 13th, 2010 at 12:25:18 PM EST
[ Parent ]
Greek private banks. Apparently, they are the ones buying massively. I read so many of these articles daily that this nugget of info gets lost, but usually the one to report this is Reuters. The National Bank of Greece ( private bank) is the biggest buyer.
by Upstate NY on Tue Apr 13th, 2010 at 12:36:55 PM EST
[ Parent ]
I think your scenario

I wonder if the net impact of what we're seeing here is that Greek debt--held by German and French banks--is rolling over to Greek banks with every new issue. And the Greek bank is allowed to keep buying because its Greek bonds are cleared as assets through the ECB. In the end, the Greek banks will own a much heftier amount of Greek debt--rather than banks in the eurozone--and that this will be the cutoff point for Greece, the point at which they can conceivably be lead to restructure without other euro countries taking the hit. This would mean the collapse of Greek banks, because it would be absurd to transfer the debt back to the country after this whole fiasco.

is actually a good thing...

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Tue Apr 13th, 2010 at 12:48:36 PM EST
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If so, then why didn't Ireland try the same method?
by Upstate NY on Tue Apr 13th, 2010 at 12:59:22 PM EST
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Their banks failed first, and their public debt was relatively low.

Public sector balance + private sector balance = current account balance

Ireland had a hole in the private sector and a healthy public sector.

Greece had a hole in the public sector and a healthy private sector.

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Tue Apr 13th, 2010 at 01:05:11 PM EST
[ Parent ]
Yes, I should have thought of that!

So, now, consider: most of the holdings of the Greek banks are in Turkey and the Balkans.

In some Balkans countries, these banks are the major source of liquidity.

It just never ends.

Austrian and Greek banks together have like 85% of external exposure in the Balkans.

by Upstate NY on Tue Apr 13th, 2010 at 01:19:01 PM EST
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