Why Greece hasn't been called bankrupt yet

• EU banks aren't ready

• ...But they are preparing...

What did you expect?

To have doctor Karolos Papoulias spell it out, "I, the president of the Greek state, hereby state that Greece is bankrupt?" on the Greek public television?

He couldn't - it was occupied by protesters.

Or maybe have the president of the European Council, Herman van Rompuy, say it on the Brussels television?

Come to think of it, which one?

He hasn't made up his mind - should he use the French-speaking Belgian TV, or, the Flemish one (which is what he would like)?

Who else?!

The aggressive Jean-Claude Trichet, perhaps?

His exit from the leadership of the European Central Bank, next month, is imminent (the worst timing for the strategy to rescue the Eurozone; however, in his final speech before the European Parliament, he said: "We are the epicenter of a global crisis ", which he described, - rather mildly, according to some - as "the worst since the Second World War").

The new president of the ECB, banker Mario Draghi (former governor of the Bank of Italy, and a former employee of Goldman Sachs, just like Trichet), then?

But that's a bit too much to ask, the man has barely moved into his office.

If there isn't anyone to officially announce the bankruptcy of Greece, then that means that officially, it isn't bankrupt.

Except it has already happened.

A long time ago.

• IT DOESN'T MATTER WHAT GREECE SAYS

Greek Finance Minister Evangelos Venizelos denied that the scenario of a controlled Greek default was discussed, at the meeting with the officials of the world financial institutions in Washington. He also denied that there had been talks with international creditors to reduce the country's debt by half. But who cares what Greece says?

The officials of the major financial groups, who attended the annual meeting of the IMF and of the World Bank (September 24-25, 2011), have announced that they are getting ready for the Greek default, and they are pinning their hopes on Europe's ability to prevent the spread of the crisis to other countries in the Eurozone.

According to Mads Koefoed, macro strategist at "Saxo Bank", the Eurozone needs a new start, which could be represented by the bankruptcy of Greece, and said that the markets are already acting as if Greece had defaulted: "Greece is too troubled to be able to escape them through austerity measures", he said. Koefoed is a colleague of Lars Seier Christensen (of Danske Bank), who has been giving Mugur Isărescu a hard time, by making allegedly tendentious forecasts.

But that is a very elegant way of putting it; in the beginning of the month, Alexander Dobrindt (of the Social Christian Union of Germany) urged Greece to exit the Eurozone, in opposition to the official policy of the government of Berlin, and mentioned that, if Greece doesn't succeed in convincing the officials of the ECB, of the IMF and of the EU of its ability to implement the necessary reforms required to receive a financial aid, than the EFSF should be used to allow the country to exit the Eurozone.

Greece recently promised it would repay its loan of 350 billion Euros.

IMF officials acted as if that statement was insignificant, and quickly went to the plan to restructure the EFSF (the European Financial Stability Fund), and the Germans plan to boost it by an additional 1 trillion Euros, to buy high risk sovereign debt, meaning Greek debt, first of all, (once again, acting like they were completely disregarding the Greek statements), as well as Spanish, Irish, Portuguese bonds, although it's arguable that this money would be enough to buy Italian bonds as well.

But this crisis is different, it's like fixing the liver and then having the kidneys fail: David Beers, the head of the sovereign ratings division of "Standard and Poor's" warned that the expansion of the European Financial Stability Fund may affect the rating of certain countries in the region, including that of big countries in the Eurozone, such as France and Germany.

• CHAIN DOWNGRADES - EUROPEAN BANKS AND COUNTRIES

On Tuesday, European finance ministers have agreed to strengthen their own banks, making it doubtful that the funds promised to bail out Greece would be approved.

Meaning it was a tough choice situation: either bail out Greece, or rescue their own banks.

Nevertheless, things would be dire regardless; if Greece falls, then banks which have Greek government bonds in their portfolio also fall, (and not only that, because Greece would be the taste of things to come, a template of what would happen to the other debt ridden European countries); if Greece doesn't fall, then banks don't improve their situation, but in turn countries that bail out will weaken.

Worried the collapse of the Eurozone might cross the ocean, US Treasury Secretary, Timothy Geithner, warned governments that it should team up with the European Central Bank, or else risk cascading sovereign defaults.

Cascading, you say?!

Last week, rating firms were acting like savages dancing around the fire.

Nine Portuguese banks found themselves downgraded by ratings firm Moody's, including: Caixa Geral de Depositos owned by the state, the largest listed bank, Millennium bcp, Banco Espirito Santo, Banco BPI, Banco Santander Totta and Caixa Economica Montepio Geral.

"The main reason why Moody's a cut the ratings of debts and deposits of most banks is the deterioration of their ability to secure financing without outside support," the agency said, which had already downgraded Portugal by four notches, to Ba2, in July.

As for Fitch, on October 7th, it announced it would continue to monitor Portugal in view of a possible downgrade, at the end of the year (Portugal is the third and latest country to receive an international bailout, after Greece and Ireland).

Moody's said it expects the quality of the assets of Portuguese banks to continue to deteriorate, due to weak economic growth prospects, and government austerity measures, as well as due to liquidity problems caused by lack of access to wholesale funding.

The same agency has also lowered the ratings of two major British banks (Royal Bank of Scotland and Lloyds), invoking the risk of low support from the government in the event of another crisis in Great Britain, whereas British finance minister George Osborne said that British banks remain well capitalized and are in a better position than their European rivals, which are facing higher losses due to their holdings of sovereign debt of the countries on the outskirts of the Eurozone.

Moody's has also cut the rating of Santander UK (the British division of Spanish bank Santander), Co-Operative Bank, Nationwide Building Society and of other seven smaller British construction companies. The need to recapitalize banks is the main factor which led to downgrades all over Europe over the last weeks and months, even though the sector was widely refinanced after the 2008 crisis.

UK banks raised over $120 billion in the last three years, forced by the government to raise low capital levels. Over the same period German banks have raised about $40 billion, Italian banks have raised $29 billion and French banks -- seen as most in need of fresh funds -- have only raised $22 billion, according to Reuters data.

Also on Friday, since it didn't have time to deal with petty stuff, Fitch cut the ratings of Italy and Spain, a move which comes as a follow up to Moody's downgrade of the sovereign bonds of Italy, and to the downgrade by Standard & Poor's on September 19th of the Italy's short and long term sovereign debt.

The news of the downgrade of Spain came just as Banco Popular Espanol, S.A. and Banco Pastor, S.A said that they would merge to become the fifth largest bank in Spain.

Concurrently, not to be outdone, Standard & Poor's downgraded French-Belgian bank Dexia, which was also suspended from trading on the stock exchanges of France and Belgium, whereas rival agency Fitch placed it on watch with a negative outlook.

On the other hand, Moody's went one step further and announced it would put Belgian government bonds on watch with a negative outlook.

I'll bet...

The toxic assets of Dexia amount to half of the domestic GDP of Belgium!

• DEXIA - THE FIRST VICTIM

"Our interpretation of Dexia's Oct. 4 statement that it intends <> is that some of its entities could potentially be separated from others, says Standard & Poor's, in the communiqué announcing the downgrade of Dexia.

Much to the displeasure of the French, Belgians said that they are not willing to be stuck holding the bag on their own, and that their partners should endure some of the fallout themselves (especially since the French division of the bank is loaded on municipal bonds of French cities).

One meeting between the Prime Ministers of the two countries was scheduled for yesterday. Various suggestions were made, such as the takeover of that division by Banque Postale CDC, which made the French Unionists of La Poste rather unhappy. They insulted the French-Belgian bank, saying that "Dexia is a caricature of the kind of damage wreaked by the race towards ever-greater financial profits by any means necessary".

Dexia is a cause for concern for two states, France and Belgium, which would want to avoid at all cost being lumped in with Spain and Italy.

Everyone is looking to the German locomotive (Angela Merkel and Nicolas Sarkozy apparently have different opinions on how to solve the Dexia problem), but Germany isn't doing so hot itself: according to a communiqué by the Federal Statistics Office, Germany's debt has ballooned. The Federation itself, the lands and the communes, had aggregated debts of 2,072 billion Euros at the end of H1 2011, up 31.9 billion Euros over March 31st, 2011. The Federation's debt, which accounts for most of the total figure, has increased by 25.4 billion Euros, whereas the debt of the lands increased to 605.8 billion Euros. The debt of the communes rose by 1.8 billion Euros.

The question arises: if not even Germany is able to balance its budget, then who would succeed in balancing the entire European continent?!

Is anyone still entitled to speak of a European government?

• THE WISE MEN

Theo Waigel, former German finance minister (1989-1998), says that at an exchange rate of 1.35 dollars for one Euro, much better than it was at the time of its launch, (January 1st 1999, in non physical form and January 1st 2002, as banknotes and coins), one can't speak of a crisis of the European currency. "It's not the currency that's in a crisis, rather some states are faced with a financial crisis", Waigel says, and one would be inclined to agree with him, unless one also takes into account the economic policy difficulties which the less developed countries in the Eurozone are facing: after switching to the Euro, they can no longer adjust the exchange rate.

The Nouriel Roubini oracle hasn't changed its tune:

"The way I see the economy of the world, we are entering a recession again. I thin the US is already in a recession, judging by the data - the same applies to most countries in the Eurozone. At this time, the problem is not whether it will be a simple recession or a W-shaped one, but rather of how severe it is going to be and whether it will be accompanied by a global financial crisis", the American economist said. He went on to say:

"The answer to this question depends on what will happen in the Eurozone and whether countries can act together. We are running out of bullets, and a new sovereign debt crisis in Europe could have consequences far more dire than the collapse of Lehman Brothers".

George Soros said that the financial markets are steering the world towards a new financial crisis, similar to the "Great Depression", which would have major political consequences, and also enumerated the measures needed for a new recession, and the need for the governments of the Eurozone to reach an agreement on the creation of a shared treasury for the region, as well as the placement of the main banks in the Eurozone under the management of the ECB.

That's quite an interesting lapse from the man who supports "an open society"...

• AFRAID OF FEAR

The main reason for bankers to worry is that, if Greece defaults, the situation would spark a general selloff of Eurozone sovereign bonds, causing an even greater financial crisis.

Andreas Schmitz, the president of the German Banking Association "BdB", said that "an isolated default of Greece would be manageable. But, if a wave of defaults were to sweep across Europe, that would be different. Many banks would be in danger, not just the European ones". Bankers estimate that they could face haircuts of 60-80% on their holdings of Greek bonds, in the event of default.

So, the main reason to worry, if Greece officially announced its default, is that investors would get scared.

American funds have already pulled out their money from European banks, and some of the latter were forced to sell their stocks for dollars.

And as a result, European banks are stalling, so they can ready for the official announcement of the default, even though Greece has already defaulted.

In others words, we are afraid of being afraid.

Looking at the computer screen which displayed the moves of the world's stock markets, an American broker said: "If this wasn't the planet's financial Armageddon, it would be the best time to buy!"

I say we go into farming.

Come on, let's go!