Why is our exposure to Greek debt the elephant in the room?
It is the dreaded vote of confidence so feared by football managers worldwide. The markets will have shuddered when Jean-Claude Trichet, president of the European Central Bank, said: “Default is, for me, out of question, so it's as simple as that.”
Increasingly few people accept that Greece can escape this crisis without restructuring its debts. Mr Trichet's attempt at reassurance thus has the opposite effect: his categorical vote of confidence in Greece yesterday simply left him looking out of touch.
In the meantime, the contagion continues. Moody's warned yesterday that any additional perception that other governments might default on sovereign debt would hit the UK particularly hard, because our banking sector is disproportionately large. But even before the threat of default begins to impinge upon the UK, Britain's banks have a problem.
The Bank of International Settlements has said UK institutions have lent $15bn (£10bn) to Greece, $24bn to Portugal, $77bn to Italy and $114bn to Spain. Defaults would therefore be very painful for some.
In France, where the banking system is more exposed to Greek sovereign debt than any other, individual institutions have begun to give details of what they are owed. BNP Paribas said yesterday that it holds E5bn-worth of Greek government bonds, while BPCE, the French mutual, declared a E1.4bn exposure.
Is it too much to expect that Britain's banks should begin making similar declarations, particularly as Europe's financial authorities are now publicly urging institutional investors not to dump their Greek bonds?
The Independent newspaper asked each of Britain's largest banks for details of their exposure to Greece last week — not a single one was prepared to even offer a ballpark figure.
Investors in British banks should know that there is likely to be a day of reckoning on these exposures sooner rather than later.
Do not be misled by the nonchalance of Mr Trichet who, on top of ruling out any possibility of a default yesterday, insisted that the ECB had not even discussed the possibility of intervening in the markets to support government debt with a bond purchase programme and looked genuinely hurt by questions about the future of the euro.
He may hold these views sincerely, but he is in an ever-smaller minority who do so.