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By David Vance On October 23rd, 2011

Europe's leaders threaten Greek default if banks won't take haircut

I never cease to be amazed at the hubris that is so characteristic of the Euro elite. Just think about this;

Europe’s leaders are threatening to trigger a formal default on Greek debt and risk a “credit event” if banks refuse to accept losses of up to €140bn (£120bn) on their holdings. Hardline eurozone members, backed by the International Monetary Fund (IMF), delivered the ultimatum this weekend after an official report found that in a worst-case scenario Greece could need a second bail-out of €450bn – twice the current package and more than the entire €440bn in the eurozone’s rescue fund.

Vittorio Grilli, a senior EU official, travelled to Rome yesterday to present the “take it or leave it” deal to the Institute of International Finance, which is leading the negotiations for the banks. “The only voluntary element for the banks now is to take a 50pc haircut or face a credit event, a default,” said an EU diplomat. The threat marks a dramatic change of stance in Brussels, and follows early warnings that a Greek default would set off a chain reaction that would result in a worse financial crisis than in 2008. Although wary about the markets, they are now thought to believe that a “big bazooka” solution could contain the crisis in Greece.

Let’s sort out this nonsense.

For starters,  the notion that those banks with exposure to Greek debt should brace for a 50% haircut is wrong. It should be 100%.

Next, the idea that Greece can in any way be saved and remain in the EU is purely delusional. However this is incompatible with the burning  political ambition that drives the EU on so there remains this constant conflict.

Finally, forget the “big bazooka”. There is going to be a Big Bang and it will be the sound of the EU imploding. Once Greece goes, others will follow.


  1. David

    You seem to think that the EU and the Euro are one and the same. I agree that the Euro will not survive in anything like its present form. But the EU will survive, probably more like the old Common Market that we joined in 1972, i.e. primarily as a European free trade zone with a few added bells and whistles.

    Anyway here is a simple explanation of how the Euro will fail: “The dominoes of debt are toppling in Europe, and there is no way to stop the forces of financial gravity.”

  2. “Europe’s leaders have agreed to change the EU treaty if necessary to help resolve the eurozone’s debt crisis and stop the region sinking into recession. EU president Herman Van Rompuy said after a day of emergency talks in Brussels that members would “explore the possibility of limited change”.

    Needless to say, they will attempt this without the inconvenience of consulting their electorates. No referendums will be necessary, the elites will decide what is good for their people. And that be printing Euros.

    Link here