Wednesday, February 10, 2010

Behind the German Bailout of the PIIGS

Naturally, it's about protecting Germany's damn big banks. Destabilise the entire eurozone, but protect those banks. German banks appear to have major debt exposure to the PIIGS.

Germany is worried that any flight out of Greek assets, especially government bonds, could hit its banks and those in other eurozone countries, reports FT.

”We’re thinking about what we should do if the crisis spills from Greece into other euro countries. So it’s more about finding firewalls, containing the problem, than principally about helping the Greeks,” an unidentified source told FT.

Michael Meister, a senior German parliamentarian, was quoted as saying that help was possible under certain circumstances and that Wolfgang Schäuble, finance minister, would brief lawmakers on Wednesday about options for helping Greece either bilaterally or at EU level.

Angela Merkel’s spokesman denied any decision had been taken.

Big banks or not, the insanity of bailing out Greece remains, though, at least with the concerns about German banks there appears to be at least a bit of self-interest at one level, the banker level, in Germany. A bailout still means destabilisation of the entire eurozone.


  1. Follow the money and you will always find a special interest group. Wenzel does a good job with this story.

  2. In reading this you'd think today's Germans still feel guilty about crimes committed 30 years before their birth.

    I'm not of the following economic policy persuasion but, but if they wanted to shield their banks at minimal cost, they could have just guaranteed a portion existing (not future) holdings of Greek debt as well as a smaller portion of the other PIIS debt.
    If Germany bails out Greece, what incentive do other countries such as Slovenia or Finland have to pay any debt they may have?
    Besides, Germany is already past the Maastricht Treaty limit of 3% deficit. Where will their bailout money come from?