Anatomy of a “Holding Operation”
Anatomy of a “Holding Operation”
By April 2010, Greece was teetering on the brink of bankruptcy. The largest sovereign default in history now loomed as early as May 19, when a massive €8.9 billion bond payment was due. Since Greece's principal lenders were a handful of systemically important French and German banks, each “dangerously overexposed to peripheral countries,” the prospect of a Greek payment suspension and subsequent contagion across the periphery unleashing a crippling continental banking crisis looked particularly unattractive to the French and German governments. This chapter shows how the high concentration of Greece's debt among a number of big banks in the core countries eventually moved the creditor states and the European Central Bank to join forces with the IMF and intervene aggressively on foreign bondholders' behalf, disbursing a series of record-breaking international bailout loans under strict policy conditionality to keep Greece solvent and servicing its external debts.
Keywords: Greek debt crisis, Greece, financial crisis, debt servicing, conditional lending
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