Monday, January 18, 2010

The Delicate Greek Debt Picture

Here's a chart via Deutsche Bank showing European government debt held by foreign banks.

The co-ordinate to note is that, of course, of Greece. At end-Q3 foreigners held EUR216bn of Greek government debt (72.3% of the total market, 90.2% of GDP), This is double the Greek debt held by foreign banks as recently as end-04.

DB concludes:
Given recent downgrades and another round of revisions to budget data from previous years, a sharp slowdown or even reversal of inflows from foreigners into the local debt market has become an increasing risk.
FT adds:
Matters are made worse by the fact that the ECB has taken a hardline stance on the collateral criteria for its liquidity ops. That means if Greece is downgraded by Moody’s (the only agency still rating it at the A-level) its debt will no longer be eligible for the ECB facilities once the central bank raises its collateral-threshold back to its original level of A-.
And that's how close Greece is to a major financial crisis.

It could very well mean their pulling out of the EU in an attempt to bring back the drachma as their own currency (versus using the Euro) in a mad attempt to print their way out of the crisis.

No comments:

Post a Comment