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BBC/ R. Peston, Analysis
Factoid as reported in today's WSJ: French banks' exposure to Greek debt is $56.7bn...while German banks hold $34bn.
France's President Sarkozy has proposed a complex Greek debt rollover/reinvestment scheme for investors...featuring 50% of proceeds reinvested in 30 year bonds at 5.5% up to 8%...with 20% in zero coupons.
What does it mean...and why is it important?
BBC biz editor Peston wades into the economic weeds.
BBC: "...if there were a default by the Greek state even on a tiny element of what it owes, bankers would be forced in one fell swoop to write down the value of their loans to the government and probably take losses on associated credit too.
AND:"... if you are curious about why France and Germany appear to be the bosses of the process of attempting to secure Greece's financial future, it is not just that they have the biggest economies in the eurozone: their banks have the most to lose from a Greek default, with French banks most exposed.
"...that $100bn of potential losses for non-Greek banks becomes multiplied by many times if a Greek default were to spark more acute financial woes for the dominoes next in line, Ireland and Portugal."
And...then there's the unthinkable default... giant Spain!
Also...as added insurance...Sarkozy's former FM...Cristine Lagarde will almost immediately take over at the IMF. That by itself is highly unusual.
Will she endorse Sarkozy's plan?
Do old shoes feel more comfortable than a new pair?
Bien sur, mon cheri...bien sur!
For OPINION by Peter Chowla. Lagarde may be the first woman boss but she's not a reformer.
"Lagarde's first instinct after the announcement of her appointment was to continue pushing the country ( Greece) towards a downward spiral of austerity, unemployment, and recession."
