The Greek finance ministry was on the defensive on Thursday after a new budget watchdog released an internal report warning that debt was ”out of control” just as officials held critical talks with creditors. Finance Minister Evangelos Venizelos, who had enough troubles this week explaining Greece’s reform delays and target slippage to auditors from the EU, the IMF and the ECB, attributed the error to inexperience.
The collateral offered would be worthless in the event that the Greek state failed to repay the bailout loans.
Greek banks have almost solely survived on using Greek bonds and state backed bank debt to obtain loans from the ECB. If the state fails to repay its bailout loans, which would mean Greece had defaulted, these huge amounts of state debt and guarantees which help support the banking sector would unwind and the banking sector would collapse.