Greek Crisis Is City of London/ECB Crisis

April 30, 2010 (LPAC)—It is now being acknowledged, as Lyndon LaRouche has said, that the "Greek crisis," and even the so-called "sovereign debt crisis," are in reality the sinking of the entire European banking system centered on the City of London and the European Central Bank.

Interest on Greek two-year bonds at one point reached an astounding 38% yesterday. They were trading at 1.2% in November, and yesterday, 15% when the day began. These rates only indicate that the so-called "market" is already factoring in a default or restructuring.

In a commentary in the Financial Times, Mohamed El Erian, chief executive of the bond trader, Pimco, wrote under the headline, "The Greek Crisis Now Endangers The Private Sector": "The already material risks of disorderly bank deposit outflows and capital flights are increasing. The bottom line is simple yet consequential: The Greek debt crisis has morphed into something that is potentially more sinister for Europe and the global economy. What started out as a public finance issue is quickly turning into a banking problem too; and has become a full-blown crisis for Europe."

Nonetheless, any restructuring will blow out London and the ECB. Even Ambrose Evans-Pritchard writes that "Greece knows it can opt for default at any time, setting off an EMU-wide crisis and bringing down Europe's banks. It also knows that key figures in the Bundestag favor debt restructuring." In this regard he mentions Volker Wissing of the finance committee and Leo Dautzenberg from the Christian Democrats. The London Times reports that even Irish Foreign Minister Michael Martin made comments that Greece's debt must be restructured, which was immediately denounced by Finance Minister Brian Lenihan.

While French and German banks hold the lion's share of Greek debt, it is British banks which hold the Spanish and Portuguese debt. A report to investors Credit Suisse, according to the Daily Telegraph, said that British banks hold 100 billion pounds worth of Greek, Spanish, and Portuguese debt. This includes 25 billion pounds in Greek and Portuguese debt and 75 billion in Spanish debt. Of that, Barclays holds 40 billion pounds, which does not include "daily positions in Barclays Capital. Inter-Alpha's Royal Bank of Scotland, which is 84% owned by the British taxpayer, holds 30-35 billion pounds, mostly of Spain's, the land of Banco Santander.

As for Greece, the BIS claims it owes $240 billion (160 billion pounds) overseas, with France and Germany holding $75 billion and $45 billion respectively. But also Fortis, Dexia, CASA and Societe Generale are in the game. So, when it is finally recognized that Greece has gone, the ECB goes under, and when Spain and Portugal go down, the City of London crumbles.

As for Britain following Spain and Greece, the Guardian notes that while Britain still holds its AAA rating, it is the only country with this rating that is also rated "negative."