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Concerns grow that Greece debt crisis could overstress European Bank

The Greece debt crisis, which is still subject to German parliamentary approval and may be challenged in court, is putting unsustainable stress on the European Central Bank, some analysts say.

Greek, National Bank of Greece and European Union flags wave at the headquarters of the National Bank of Greece, the biggest bank in the country, in Athens, Thursday. EU and IMF officials say a deal will be in place by the weekend to provide Greece with aid to make upcoming debt payments.

Thanassis Stavrakis/AP

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The Greek debt crisis may be turning into a European Central Bank crisis.

As the European Central Bank (ECB) continues to loan money to keep Greece afloat, the ECB's exposure to the failing economy also grows, threatening potentially backbreaking losses if Greece declares bankruptcy. This is a looming concern as Germany lawmakers continue to balk at a bailout.

The extent of the financial assistance needed by Greece – with Spain and Portugal, both of which also saw their debt downgraded this week, now in similar positions – is placing unsustainable stress on the ECB, says Desmond Lachman, a former managing director at Salomon Smith Barney and current fellow at the American Enterprise Institute.

IN PICTURES: Top 10 things Greece could sell to pay off its debt

“What this has now become is a European Central Banking crisis,” says Mr. Lachman. “The main concern of [EU negotiators] is keeping this crisis from affecting the ECB, and whether continued default [in Spain and Portugal] would affect the bank.”


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