German Finance Minister Prepares for Possible Greek Bankruptcy

[marmar]

from Der Spiegel:




With doubts growing about Greece's ability to implement important savings measures and reforms, there are concerns that insolvency may be inevitable. In Germany, officials in Wolfgang Schäuble's Finance Ministry are exploring what Athens' financial collapse would mean for the euro zone.

German Finance Minister Wolfgang Schäuble, who is reportedly doubtful that the country can be saved from bankruptcy, is preparing for the possibility of Greek insolvency. Officials in his ministry are currently reviewing scenarios for handling such a situation, exploring what it might mean for the rest of the euro zone. Under the first scenario for a Greek bankruptcy, the country would remain in the euro zone. Under the other, Athens would abandon the common currency and reintroduce the drachma.

The European bailout mechanism, the European Financial Stability Facility (EFSF), is playing a key role in those considerations. Soon the EFSF is expected to be given new powers agreed to by European leaders at a special euro crisis summit in late July. Two instruments at the EFSF's disposal are at the forefront of the Finance Ministry's scenarios.

Bankruptcy Could Create Credit Crunch

One of these key instruments would be credit lines provided to countries like Spain or Italy if investors stop lending them money after a Greek bankruptcy. If banks were forced to write off the billions in Greek government bonds on their books, they could become reliant on billions in rescue fund aid in numerous euro-zone countries. Both developments are to be expected in a Greek insolvency, regardless of whether the country exits the euro or not. .........(more)

The complete piece is at: http://www.spiegel.de/international/europe/0,1518,785482,00.html

[fasttense]

1. They should just default on the loans like Iceland.

Iceland refused to cover the banker's bets with their tax dollars and they are doing fine.

Though Greece does not own it's currency like iceland does, so there is a big battle against the EU they would have to fight.

Or how about restructuring the loans?

Instead the EU, IMF and world bank forced on Greece (with the help of some crooked Greek politicians) austerity for their working class and luxury for their idle rich.

I'm sure banksters everywhere appreciate Greece's sacrifice to their wealth.

[xchrom]

2. recommend

[FLPanhandle]

3. A decent finance minister would have prepared for this over a year ago.

It was obvious that Greece wouldn't be able to cover it's debt for a long time now. All the noise and austerity measures have always been a delaying action against the inevitable.