Crisis of the European Monetary System: Showdown in Athens
The EU Debt Overhang


by Mike Whitney
Global Research
December 10, 2009



Greek Finance Minister George Papaconstantinou has the European Central Bank over a barrel and doesn't even know it. If he had a handle on the situation, he'd thumb his nose at the ECB's austerity measures, and demand a no-strings-attached loan package to help his country get through the current rough patch. Instead, he's carrying on like a faint-hearted schoolboy. Papaconstantinou is concerned that Greece's dire economic situation will lead to default and capital flight. But his fears are overblown. The ECB is not going to let Greece default and trigger another Lehman Brothers-type meltdown. That won't happen. The Finance Minister needs pull himself together and realize that he's in the cat-bird seat.

Greece's problems began to snowball on Monday when Fitch Ratings cut their debt rating from A- to to BBB+ . That means it will cost the government more to refinance its debt in the future, and that the ECB may not accept Greek government bonds as collateral when they return to the pre-crisis rules in 2011. The news put global shares into a tailspin and the volatility has continued through midweek. The ratings flap has rekindled fears of a sovereign default within the EU, which is why the markets are so jittery.

According to Bloomberg: "The European Commission “stands ready to assist the Greek government in setting out the comprehensive consolidation and reform program, in the framework of the treaty provisions for euro-area member states,â€