What would happen IF Greece did collapse?

A collapse of Greece is feared more in Paris Frankfurt and Geneva than in Athens.

One of the first things that would happen is the AT least one major French bank would be blown out of the water. It would happen by it not being able to borrow AT ALL and the cost of insuring its debt would go into orbit. Who would this be? Certainly PNB Paribas, and possibly Soc Gen and Credit Agricole. French banks, according to Hugh Hendry of Eccletica, who has made a fortune recently betting against the euro, thinks a realistic mark to real market value of Greek debt would burn €35 Billion of French bank capital holdings. This confirms the size of the losses that have been known about for ages ( see – ‘What is Going to Happen to Greece’ posted on 22 Feb. as a recent example)

Could they survive? NO, not without state or ECB bail out. If, however, those banks have take advantage of the ECB’s recent suicide note of accepting Greek bonds, and already pledged it as collateral at the ECB, they might survive but if they do, the ECB would not. Not in one piece anyway.

The German Banks would similarly lose a vast amount as would the Swiss. It is interesting to note the Swiss central bank seems to have quietly stopped trying to prop up the euro as a way of keeping its own currency from getting too strong.

British banks would not immediately suffer, But the effect on Spain and Portugal would be swift. One of more Spanish banks would teeter. Portugal would lose one. Both would see their borrowing costs and insurance on their debt join the Greeks in the wilderness. That would start the destruction of the British banks.

The FED too might get hit for a large chunk of money IF it is the case, much rumoured, that AIG wrote a lot of CDS insuring Greek debt. That cost would then fall on the US taxpayer.

As a result of all this growth projections in ALL countries would collapse. That would mean cuts NOW.

I could go on but it would be tedious.

The question is therefore, surely this is why we must bail out Greece? Yes?

Well, actually I think no. Madness? No not that either. Just the conviction that the attempt to bail out first the Greeks and then other after, will result in an even bigger, more protracted and socially dangerous outcome. The only thing is it would be slower. There would still be time to pretend it wasn’t happening. Time to draw a bonus or two more. Time to leave the country for sunnier climes.

There are two futures, in my opinion. One in which pain comes quickly and hits everyone, the financial class and poor alike, another future where it happens slowly, at each stage getting bigger and bigger and, most importantly, can be made to fall overwhelmingly on the poor and almost not at all on those who caused the crisis. It may even leave them profiting from it.

What is going to happen. No one knows. What should be clear by now is the terrifying stakes our governments have placed on the table, certainly without, I might add, my consent and perhaps not yours either.