Two of the largest holders of Greek debt in Germany may not participate in the second Greek bailout, despite previous assurances from German government officials that these “bad banks” will “make a contribution.”
“It is a decision for the two bad banks to take,” said a spokeswoman for the Germany Finance Ministry, as quoted by Reuters.
“Bad banks” refer to agencies backed by the public sector which have collected all the toxic Greek assets from good German banks.
The questionable participation of these “bad banks” strikes an ominous tone, particularly after the Greek government announced last week that it would not go ahead with a crucial bond swap if less than 90% of private sector Greek bondholders chose to participate.
The two major “bad banks” — FMS Wertmanagement and Erste Abwicklungsanstalt — hold a combined $12.3 billion in Greek sovereign debt, according to the Financial Times.