While Europe is preoccupied with a possible restructuring of Greece’s debt, huge risks lurk elsewhere – in the balance sheet of the European Central Bank. The guardian of the single currency has taken on billions of euros worth of risky securities as collateral for loans to shore up the banks of struggling nations.
The ECB, the central bank of Europe, took huge amounts of junk securities as collateral before making loans to debtor nations like Spain and Ireland. They probably have the loans of their books at inflated values. Worse, since everyone knows the securities are junk, they can’t sell them. And now the debtor nations are balking at being forced to pay back the bonds at full value.
The ECB is effectively insolvent. A charade continues that somehow the bonds will all be paid in full even if that impoverishes the debtor nations. This is reminiscent of Lehman Brothers before it collapsed. But make no mistake, the only reason the ECB took on such massive risks was to save the bondholders. They are protecting the interests of the ultra-wealthy against those of all others, including countries.
Sooner or later, Greece will default. The Telegraph UK details the probable scenario. Here’s a few of the outcomes they predict.
- Every bank in Greece will instantly go insolvent.
- Greek government will declare a curfew, perhaps even general martial law.
- The Irish will, within a few days, walk away from the debts of its banking system.
- The Portuguese government will wait to see whether there is chaos in Greece before deciding whether to default in turn.
- The European Central Bank will become insolvent
- Attention will turn to the British banks. Then we shall see…
It’s just a question of when Greece defaults. Predatory, greedhead banksters bought bonds from Greece they knew were risky and are now trying to force Greece to pay in full rather than take a haircut on the bonds as is normal in such circumstances. The debtor nations should do what Iceland did. Default, let the banks fail, arrest any criminal banksters, and then carry on.
Yesterday Germany humiliated itself by agreeing to a second Greek bailout, but this changes nothing except to delay the inevitable default – oh excuse me, I meant to say “restructuring” – by Greece a few more months. And it could be the end of Merkel.
The banksters don’t care who or what they destroy as long as the garbage bonds they bought knowing full well were risky are paid in full.
And good luck: the Greeks are so delighted with being bailed out, pardon, with bailing out Germany’s banks, that they have been celebrating this fact for 6 nights straight in front of the parliament in Athens. Surely this latest batch of good news, will only send the popular jubilation to previously unseen highs.