Galery

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If you ask a frog to come up with a plan for draining a swamp, you are like to end up with a proposal for more flooding. Bankers were asked to come up with a plan for private-sector involvement under the leadership of Ackermann and the Institute for International Finance; what they came up with was a plan for more support.We would never ask the tobacco industry to work out a new public health policy. A further problem is the fragmentation of political power in Europe. This prevents the political authority from taking a strong negotiating position against the sovereign-debt creditors. In 1982, when the US faced a sovereign-debt crisis brought about by US banks’ lending to Latin American nations, US finance minister Baker rejected private-sector demands that the US taxpayer bail out of creditors. While this seems similar to the position of German Chancellor Merkel, her position is much weaker.

How do you see the future of the Greek bank system? The local banks struggle with the liquidity problem, they are very much exposed to the Greek bonds, the investors do not trust them much. What ways of recapitalization do they have?

If the Greek politician can save nothing, their priority should be to at least save their banks. If I were prime minister of Greece, this is what I would try to negotiate with Sarkozy and Merkel. The Greek banks need a lot of new capital if a default occurs -- as soon as possible. And with a banking system in default as well, the ensuing economic crisis could be twice as big.