These are the personal views of David Gilmore, partner at Foreign Exchange Analytics:
For some in the market the Greek debt crisis has always been about the European banking system…collateralized by “risk-free” sovereign paper from some less than “risk-free” sovereign credits. Tons of debt issued by Greece, Spain, Portugal (not too different from AAA rates subprime MBS) and yes Italy support the banking system in the Euro Zone as collateral for borrowing from the ECB and from other banks, as well as a place to capture yield. Well when markets discern that “risk-free” sovereign debt is not really “risk-free” the inevitable run on weak credits starts. And like the subprime-driven run on banks in 2008, officials only add to downside risk as they assume the problem is contained.