Once more, Athens is replete with TV crews from all over the world, eager to relate the latest in the long running saga of whether/when/how Greece will default. Meanwhile, the real game is being played out elsewhere, in the corridors of power in Frankfurt, Brussels, Berlin, Washington where no serious person bothers to discuss Greece as such, courtesy of having larger fish to fry.
Their discussions may occasionally mention the sideshow of the Greek debt but, believe me, they are centred upon the French and German banks (something I have been saying for a while now). The main question that keeps exercsising their mind concerns the manner in which Greek debt has been blended by the banks into new complex derivatives that involve the banks’ own (private) bonds. Thus, on top of the relatively small exposure to Greek debt, the French and the German banks have created monuments to their idiocy; huge new (off the books) synthesised debt whose basic property is that it is almost impossible to know which bank owns bonds issued by which other banks, with bits and pieces of Greek debt thrown in for good measure. In short, a Greek default threatens the eurozone’s bank with another moment of truth, similar to that we experienced when Lehman’s collapse revealed the intricate webs of debt whose tenticles had entered every recepticle of financial activity worldwide. Europe’s dithering is the result of being caught between a rock and a hard place: Wishing to push Greece into default (as an alternative to throwing good money after bad) but also knowing that a Greek default will unveil the banking sector’s sorry state. Not wishing to alter the eurozone’s architecture, nor to unify its banking sector, they do what they are good at: venting anger, baking ‘plans’, renouncing their plans, spreading roumors of a ‘final solution’, denying these rumours and, lastly, going to bed at night as clueless as they were in the morning.
How does one explain all this in a short interview on tv or radio? I am damned if I know. Nevertheless, here is my effort. Click here for my attempt to explain the above on Dutch tv (Nieuwsuur’s main evening news program; jump to 19′) and here for a similar effort on Canadian radio (CBC, jump to 2′).