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Economic Research

Greece/EZ Crisis: Slow Motion Train Wreck of Greek Bank Contagion Accelerates

EXECUTIVE SUMMARY

The Greece/eurozone (EZ) debt crisis has entered a new phase, in which market focus is shifting from general sovereign risk and euro currency risks to credit risk in Greek banks, with rising Greek sovereign risk seemingly isolated. This is evident in the increasing divergence of CDS and cash bond yield spreads between Greek debt and Bunds, the remaining PIIGS (Portugal, Ireland, Italy and Spain), the neighboring Balkans and potential EZ victims of collateral damage, such as Austrian banks. Long protection positions on Balkan sovereigns look attractive in this[...]

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