I have been reading Adults in the Room, and something I don’t understand is how Greece declaring bankruptcy would have caused the Trillion Euro of periphery loans of the German and French national banks to suddenly go bad and result in the collapse of said banks/economies in the eurozone.
In: Economics
Declaring bankruptcy essentially means telling anyone who lent you money that you’re not capable of paying them back. Banks are the ones that lend money. So it is a chain reaction. Greece declaring bankruptcy means the banks that loaned them money are not going to receive payments that they expected which can cause the banks, in turn, to not be able to handle their borrowings. Like a chain reaction.
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