When this financial crisis began nearly four years ago the story seemed simple. The banks were broke and they told our leaders that unless the taxpayers bailed them out and took their private debts on to the public account, then the world would end. Our politicians believed them. We took on huge debts and bailed out the banks. Right or wrong, at least the story seemed straightforward: they owed us huge sums of money. Then as the crisis continued, a new group most of us had never heard of appeared – the bond holders. It turned out the banks owed huge sums to the bond holders too, and so did we. The story of who owed whom began to change.
Gradually the story became less about the banks owing us money and more about owing the bond holders....
So who are the bond holders and why are Europe's banks more concerned to pay them than us?
Finding out who the bond holders of a bank or a nation is isn't all that easy. But a few days ago Barclays compiled a chart of the top 40 holders of Greek debt. One name on the list is illuminating. Eurobank EFG(European Financial Group) is the largest private holder of Greek debt. Only national banks and international lenders such as the ECB hold more.
So who is Eurobank EFG? Well, they are part of a larger group of banks which go under the name of European Financial Group EFG, which is a Luxembourg-registered company. So are they from Luxembourg? Actually, no. The heart of the group is EFG Bank, which is a Swiss private bank. So they're Swiss? Not quite. The bank is 40% owned by the Greek Latsis family, whose fortune is managed by Spiro Latsis.
So when Greek taxpayers have their wages cut, their pensions shrunk and see the assets of the nation sold off, they will be helping to protect the Latsis's investment in Greek debt. And it's no accident that Eurobank EFG Bank holds a lot of Greek debt. The bank set up a special fund in 2009, during the crisis, specifically to buy up Greek government debt.
EFG was also a bond holder of Anglo Irish Bank. So not one but two sets of European taxpayers have been "protecting" EFG's debt investments.
All of which becomes more interesting when you step back and realise that EFG is not only a bond holder but also one of the banks being bailed out. EFG's Greek banking arm EFG Ergasias is one of the four Greek banks most reliant on ECB funding for its survival. No wonder the CEO of EFG Bank said that the Greek decision to enforce austerity and avoid default was "necessary"....
Here is the link to David Malone's blog:
