Now that the European Central Bank has decided on a bond-buying spree to aid the troubled economies of Italy and Spain, all eyes turn with renewed hope to the meeting between Greek Prime Minister Antonis Samaras and ECB head Mario Draghi on Sept. 11. Clearly, the future of Greece and the euro is still uncertain, and U.S. banks have been taking steps to limit their losses if that country is ousted from the euro and reverts to its former currency, the drachma.
Consideration of Greece's request for more time to meet deadlines for bailout funds has been put off until the troika report, currently being compiled by Greece's major international creditors, is released in early October. Last month, leaders of France and Germany both assured the Greek president that they want Greece to stay in the eurozone.
Banks aren't buying it
U.S. banks have had their doubts about Greece's recovery for some time and began preparing for the worst almost a year ago. The biggest banks have decreased their exposure to Greece's and other troubled European nations' economies significantly and are planning emergency action if Greece suffers a meltdown caused by its exit from the eurozone.
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It may seem as if these companies are overreacting, given the chaos that a Greek exit will cause in global markets, as well as the embarrassment a Greek departure will cause for the European Union. But worsening conditions in Greece, as well as problems with Italian and Spanish banks, have made companies consider the once-unthinkable scenario. Many Europeans, such as Austrians and Germans, are opposed to giving more aid to Greece, and survey respondents in France and Britain also expressed the view that Greece has had enough help from other European countries.
Just last month, the president of the ECB, Mario Draghi, vowed to do whatever is within his power to do to preserve the euro -- a promise that has been given weight with the ECB's recent vote. In another promising development, Germany's chancellor has renewed the call to find a way to keep Greece in the eurozone and is indicating flexibility about bailout terms. More will be known about Greece in a month or so, and the auditors arrived in Greece late last week to meet with that country's leaders. Meanwhile, for the big U.S. banks, it never hurts to be prepared.
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