Here is a morning thought for you.
First the French and Belgians have apparently agreed to stump up the cash to nationalize Dexia in its various parts. A cost for both the French and Belgian tax payers that will definitely lead to a credit downgrade for Belgium and which will, I think. also do the same for France and possibly for one or two of its most fragile banks as well, in due course.
Second there is the further Franco\German rescue plan for the rest of the Euro banking system which they claim to have have arrived at but the details of which are too secret to reveal.
And third there is the 0ver 10% crash this morning of the Greek banks. Both Alpha bank and EFG are down over 10% this morning.
These three things set me to thinking. France has wanted the Greek banks to be bailed out so that the bail out money can make its way to the French banks who would otherwise teeter on the brink of their own insolvency. Germany has seemed more inclined to let Greece default and ring-fence its own banks. Now France has there was more immediate peril in Dexia’s demise. The French have also talked about how nice it would be if the EFSF were to take some of the cost of Dexia.
Could it be that Germany has said to France that they would countenance the EFSF or Germany directly helping with Dexia IF France agreed to let the Greek banks go? Basically saying to France you can have help with Belgium or Greece but not both.
If such a decision were put to France they would, I think, have to chose Belgium and Dexia simply because it is far, far bigger than the Greek losses and riek.
Just a thought.