Greece moved closer to obtaining some much needed  additional aid last Friday when Germany and France agreed that private sector participation in the Greek bailout should be voluntary or not automatically including the private sector.

But by Sunday evening, the second round of bailout looked less likely as the emergency meeting of European finance ministers did not conclude with a clear payout for the ailing country.

European finance ministers demanded that Greece pass laws to cut the budget deficit and sell state assets first. According to analysts at Unicredit, the Greek prime minister has already succeeded in plans to reform his cabinet  and a confidence vote on the current political path in Greece, including harsh austerity measures, will take place on Tuesday.  

Greece's problems has reignited concerns that contagion to other over-indebted European Union member countries cannot be ruled out.

"In the case of a Greek sovereign default, the resulting shocks for the Greek banking system and the systemic shock for European banks could become an overkill, but also incentives to follow the default path by other E.U. over indebted countries are rising which increases contagion risk for Ireland and Portugal but also market contagion for Spain and Italy," said Unicredit analysts.

Last week Moody's Investor Service placed the ratings of BNP ParibasSociete Generale and Credit Agricole under reviews that will focus on their holdings of Greek public and private debt  

“The primary focus of all three reviews will be the banks’ credit exposures to Greek government debt and the Greek private sector and the potential for inconsistency between the impact of a possible Greek default or restructuring and current rating levels,” Moody’s said in a report.

According to a Marketwatch report, U.S. banks had a total exposure of $41 billion to Greece by the end of 2010, based on the latest figures issued June 9 from the Bank for International Settlements.  

About 83% is tied to guarantees that range from protection for sellers of credit-derivative contracts to other obligations owed to third parties.  


Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.