Guardian
June 28, 2011
The narrative now cemented in the public imagination that Greece could be the "next Lehman Brothers" is, for the most part, largely overblown. There's no doubt that a Greek default would be incredibly painful. But while on the surface the analogy may seem apt – two bankrupt, systemically important players in search of bailouts – dig a little deeper and it becomes clear that the comparison is misguided and even misleading.
Over the last few days, bankers, politicians and journalists have competed for the prize of most dramatic-sounding Lehman-style analogy. A Greek bankruptcy, said European Central Bank executive board member Jürgen Stark, could "overshadow the effects of the Lehman bankruptcy"; Gary Jenkins, head of fixed-income research at Evolution Securities, has warned that "Greece could become the next Lehman's as investors move from one target to the next, just like they did in the banking crises of 2008"; while the head of the Eurogroup, Jean-Claude Juncker, suggested that offering Athens debt relief is akin to "playing with fire".
But, beyond the headline-grabbing rhetoric, the comparisons simply don't stack up. Firstly, the majority of those peddling this myth have a significant vested interest in avoiding a Greek default or restructuring. It was the European Central Bank that first floated the Lehman analogy. Why? Sheer self-interest. By propping up Greek banks and the Greek state, the ECB has taken on €190bn worth of Greek assets, which would face radical write-downs should Greece default.
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