Eurobankers seem stupid because they operate almost completely under a different set of assumptions. The most pernicious one has been around for a couple of hundred years, to wit, that the state has a duty (and a cash obligaion...) to preserve them, almost no matter what. Every time someone points out to them that this assumption is lunatic in an objective world, they throw up the Kredit Anstalt and Herstatt fiascoes as wishful absolute defenses to the argument. You'll never change this attitude w/o a major collapse, either.
Just BTW, my back-of-the-envelope (and thus not necessarily reliable) calcs show that a requirement for a 72% haircut on all Greek sovereign debt would produce **roughly** a 50-50 chance of Greek fiscal stability for a period of one year. Obviously, the unknowable here is whether or not Papandreou et al. are serious about the drastic budget cuts necessary, and HOW serious they are. Hence the 50-50 result.
I can hear SocGen and BNP Paribas screaming from here.
Here’s a question to which I truly do not know even the beginnings of an answer:
How much are the Greek pension system(s) invested in Greek sov paper?
Because a 50%+ haircut is going to screw the pensioners and current older employees so badly that I could see a lot more domestic instability by the “productive class” of people (ie, those who are still working) if their retirements are hit that hard.
re: the French banks. You’re so right. The French business sector, in general, is the most crony-capitalist I’ve seen outside tin-pot third world dictatorships. It isn’t just their banks. It is their media companies, their water companies, their oil companies, you name it. They’re all in bed with the government.
BTW, on Anstalt, et al. I’ve found that in studying the Depression and the banking crisis of ‘29 to ‘34, that the issue of war reparations is hugely fascinating. And studying the issue of WWI reparations led me back to the “cause” of the Versailles treatment of Germany, which was the reparations schemes from the Franco-Prussian war, in which the French were forced to pay Germany. Hugely fascinating subject in history, which ties into the banking systems in ways I had not previously imagined. For example, the “Long Depression” of the 1870’s here in the US, in which we had a debt deflation depression/recession in the latter 1870’s, and kicked off by a railroad bond collapse in October 1873, and that unsustainable boom was brought about by Germany investing reparations in the US rail bond market.
As I said, hugely fascinating. It is fascinating to see how European finances and bankers keep showing up at the scene of economic devastation time and time again, through some of the most indirect of couplings...