'American banks on the hook' in Greece

France and Germany have insisted that Greece should remain an “integral part of the eurozone.” But economics blogger Demetri Kofinas says the possible Greek default is threatening the entire global financial system.

­Even with assuring words coming from French President Nikolas Sarkozy and Germam Chancellor Angela Merkel, this just a lull before the storm, Kofinas told RT.

We are hearing a lot of rumors about the fall, which are frightening,” he said. “France and Germany have been talking how they want to wait until at least 2013, when the European stability mechanism is in place, so that they have some institutional framework to go with the bailout.

Eventually Greece will have to default, Kofinas continued, as the Greek economy is “in collapse mode” right now. Moreover, EU politicians do not seem to have a viable plan for Greece to exit its large debt burden in five to seven years and grow its economy.

American banks on the hook as well, observed Kofinas.

A lot of American banks are on the other side of this derivative,” he said. “They were insuring the debts on the books of European banks. In the event of a default, a European bank would lose out on their bonds, but would go to the American banks saying: ‘Give us the money, because you wrote the insurance.’