4 ms·
AFAIK, there was no compulsion. Instead, German wanted to lend to Greek banks / Greece because they got slightly more interest in return for debt that they bel
by fpgeek 12y ago
AFAIK, there was no compulsion.
Instead, German wanted to lend to Greek banks / Greece because they got slightly more interest in return for debt that they believed (or, more accurately, hoped) had essentially the same implicit guarantees as the German equivalent. Given how the crisis has played out, that gamble paid off. It probably shouldn't have, but then there would have been downstream issues (German banks collapsing, etc.).
- protomyth 12y agoThanks for the answer. If there was no political compulsion then the German banks (or their insurers) should have taken the hit. This bail people out for truly dumb judgement (looking at you AEG) has caused more problems then the failure would have. I do wonder what the political implication would have been if German banks had refused to lend to Greek banks?
- glesica 12y agoRead the second link in my original post. The way it worked out, basically, is that the German banks could lend to Greeks at very, very low real rates, but because inflation was higher in Greece / Spain / Portugal than in Germany, the real rate that they got back in Germany was quite good (since they didn't account for the increased risk because they, correctly it seems, guessed that Germany would force a bailout if they got into trouble).