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.
You couldn’t make this stuff up, well, then again . . .
Meanwhile Open Europe looks at a proposal that was reportedly floated a day or so ago by the boss of the Eurozone’s bailout fund as a (partial) solution to the problem posed by the Finnish insistence that any funds advanced by Finland to Greece be adequately collateralized. The idea was that some or all of the collateral should take the form of yet-to-be nationalized chunks of Greek banks, a plan so evidently absurd that I thought it would be dead before I could post on it. I might have been wrong. Open Europe believes that it may survive long enough to be presented when Eurozone finance ministers meet on September 16. Open Europe notes that the plan “has one slight snag”:
The collateral offered would be worthless in the event that the Greek state failed to repay the bailout loans.
Oh.
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.
If the Finns accept this, I have a very nice bridge to sell them.