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I don't know about derivatives, but already we are hearing that European banks are the ones holding most of the Greek debt. So if as some pundits say, Greece must restructure its debt (meaning 40% or more haircuts to the holders of the paper), the loss will go to European banks. That is why money is already fleeing Europe for the US dollar. Europe could be in for their own Lehman style lending problems, if banks doubt each others assets and ability to raise additional capital.

Meanwhile there are rumors of another loan coming to Greece at an affordable 1% interest rate. That kind of loan might do a great deal to make the budget cuts in Greece politically acceptable.

Stay tuned. A major meltdown is threatened, but let's hope Europe can avoid same. Meanwhile, their ability to revive their economies and become better customers to help our economy is reduced by the pending difficulties.
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