Ignorance writ large

June 11 (Bloomberg) -- European banking shares indicate a Greek debt default may be just a matter of time.
Investors have already pushed down financial stocks enough to imply the “erosion” in book value that may result from losses tied to a sovereign debt restructuring ...
A $1 trillion aid package from the European Union and International Monetary Fund may delay a Greek default and give Spain, Italy and possibly Portugal time to get their finances in shape, averting a wider contagion, analysts said. Greece’s debt burden is likely to prove unsustainable, said Thomas Mayer, Deutsche Bank AG’s London-based chief economist.
“Deficit reduction alone doesn’t solve the debt issue,” Mayer said in a telephone interview. He estimates Greece’s debt will rise to 150 percent of gross domestic product following the country’s austerity program, from 120 percent. “Hardly anyone I know believes they can carry it out and still not restructure. This is basically the expectation across all asset classes.” ...
A Spanish or Italian cancellation of payments would dwarf a potential Greek default. European banks’ claims on Spain totaled $832 billion at the end of 2009, while those on Italy stood at $1.02 trillion, according to figures from the Bank for International Settlements in Basel, Switzerland. That compares with claims on Greece and Portugal of $193 billion and $240 billion, respectively...
EU banks could absorb losses on government and private debt in Greece, Portugal, Spain and Ireland without having to raise funds, Moody’s Investors Service said in a report today, after surveying more than 30 lenders in 10 nations. The value of private loans such as mortgages and business credit is greater than that tied to government debt, Moody’s said, adding that any losses on private loans would be absorbed over several years.
“Based on our stress test, we believe that these banks would be able to absorb the losses that could arise from such exposures without requiring capital increases -- even under worse-than-expected conditions,” the credit rating company said...
French banks had claims on Greece of $78.8 billion at the end of 2009, the most of any country, according to BIS figures. In Germany, where banks’ Greek claims totaled $45 billion, the risks probably lie mostly with Landesbanks and government-owned lenders that aren’t publicly traded ...
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Comment: Even if Greece should default, which is rather unlikely, the risks for the eurozone is limited. I still regard the Greek drama as a Greek comedy with the attack on the euro coming from speculators with more money than brains who are seduced by some pundits who have no idea what they are talking about and whoose ignorance equals their prominence.