Editorial
May 26, 2011
Not for Christian Noyer the dull platitudes of the central banker. This week the governor of the Bank of France told reporters that any restructuring of Greece's debt would be a "horror story." Even so, his frankness about the risks of a Greek credit event stopped short of coming clean about the danger it could pose to the European Central Bank itself.
"The banks with the most Greek bonds," Mr. Noyer said Tuesday, "are Greek banks. The Greek banks themselves will be badly damaged." Those banks would need to be recapitalized. "Who will recapitalize the Greek banking system?" Mr. Noyer asked himself. And answered: "The Greek state."
But the Greek state is all but bankrupt. So the money for the recapitalization of the Greek banking system would have to come from its European partners, presumably in the form of more loans, shifting more and more of the credit risk that Greece represents to European taxpayers—and the ECB itself.
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