Did U.S. Banks Hasten Greek Demise?

The Greek prime minister seems to think so

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Debt-ridden, chaos-stricken Greece is considering investigating U.S. banks for any role they might have had in precipitating the Greek debt crisis. Greek Prime Minister George Papandreou announced the idea this Sunday, noting that "there are similar investigations going on in other countries and in the United States ... I hear the words fraud and lack of transparency," he said, according to Reuters's Jon Hemming.

What's going on here? Is this just a last-minute attempt for a spendthrift and incompetent government--as it is often seen in Europe--to shift the blame?

  • This Makes Sense  "The Greek government might sue American banks for speaking frankly about the country's ability to repay its debts," summarizes Jesse Walker at Reason.
  • Improbable "His theory appears to be that the banks did something wrong," writes a seemingly mystified Douglas McIntyre at 24/7 Wall St., trying to parse Papandreou's announcement. 
But there is a high degree of likelihood that institutional investors did nothing wrong. Based on Greece's own mismanagement of its budget and the size of its deficit, shorting the nation's debt may simply have been a smart way to make money. In other words. Greece probably brought the market’s reaction on itself
  • Actually, There's More Here Than You Might Think  "While all this sounds to those outside the EU like an effort to shift blame," counters finance blogger Yves Smith, "the fact that Greece had a budget crisis does not mean that speculators weren't trying to play the situation to maximum advantage." While Greece may have a "weak case," since "any manipulation took place in the over-the-counter, and virtually unregulated credit default swaps market," winning back public opinion is probably more important than winning an actual legal battle, Smith argues. Plus, "If Greece or the EU do find some dirt, that will support calls for much tougher rules, which it may impose on banks that operate within its borders, no doubt over protests by the US. In other words, this line of inquiry has the potential to become interesting."
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