One would assume that the new view on Greek default may be borne from the German's realization that the German banks may not be pregnant with Greek debt, but they are the leading financiers of CRE about to be rolled over and a rate spurt caused by a Greek default will push already anemic CRE values down just in time to create an equity gap in said rollovers. One should expect the planners that be to of thought these things through a little more thoroughly.

Bloomberg reports: Nowotny Signals ECB May Compromise on Greece

Greek_10_yearEuropean Central Bank council member Ewald Nowotny suggested the bank may compromise and allow a temporary Greek default as officials scramble to fix a sovereign debt crisis that’s spreading to Italy and Spain before a leaders’ summit in two days.

As Spanish financing costs surged at a 4.45 billion euro ($6.31 billion) treasury bill auction today, policy makers are trying to ease a split that’s pushed interest rates on Spanish and Italian 10-year debt above 6 percent for the first time since the euro debuted 12 years ago. The ECB has until now argued that any Greek default could spark a new financial crisis, derailing a German push to make investors help foot the bill for a second bailout of the country.

“Nowotny is well known as someone who talks a lot,” said Nick Kounis, head of macroeconomic research at ABN Amro Bank NV in Amsterdam. “He might be revealing that there’s a little bit more flexibility than what was perhaps assumed. On the other hand, we have to be a bit careful with Nowotny. I’d be cautious.”

Nowotny, who heads Austria’s central bank, said there’s “a full range of options and definitions, from a clear-cut default, selective default, credit event and so on.”

“This has to be studied in a very serious way,” he told CNBC in an interview broadcast today. “There are some proposals that deal with a very short-lived selective default situation that will not have major negative consequences.”

Over a year and a half ago I made clear that Greece would be the first to fall. The numbers never added up (The Coming Pan-European Sovereign Debt Crisis then I Think It’s Confirmed, Greece Will Be the First Domino to Fall). If you recall, many a statesman, pundit, analyst and economist state viewpoints such as mine were poppycock, reference "Greek Crisis Is Over, Region Safe”, Prodi Says – I say Liar, Liar, Pants on Fire!. Well, we see who was most accurate on that account, now. Even in our (relatively, at least in comparison with popular thought) dire default scenarios, we were actually grossly overl optimistic. - albeit probably the most realistic on the Street.

1. What is the Most Likely Scenario in the Greek Debt Fiasco? Restructuring Via Extension of Maturity Dates

2. The ECB and the Potential Failure of Quantitative Easing, Euro Edition – In the Spotlight!

3. A Comparison of Our Greek Bond Restructuring Analysis to that of Argentina

Now that it is nearly universally accepted that Greece will default in some form or fashion, it is time to dispel yet another myth using this blogoshpere thingy, and that is...

“There are some proposals that deal with a very short-lived selective default situation that will not have major negative consequences.”

I have brushed against this topic many times, ex. Financial Contagion vs. Economic Contagion: Does the Market Underestimate the Effects of the Latter?. My lectures in Amsterdam probably encapsulate it best. European commercial real estate risks being dead in the water as much of it sits on the precipice as it is with excess capacity, large and rapidly growing vacancies, and the threat of an approaching rate volatility storm. The only debt holding whose collateral is massively overvalued that could possibly compete with banks' highly overvalued sovereign debt exposure is their commercial real estate mortgage and lending exposure. Then again, according to those European experts, "Greek Crisis Is Over, Region Safe" and “There are some proposals that deal with a very short-lived selective default situation that will not have major negative consequences.” Shall we compare track records???

Live, at one of the largest banks of Northern Europe

Through prominent European television and print media...

Amsterdam's VPRO Backlight and Reggie Middleton on brutal honesty, destructive derivatives and the "overbanked" status of many European sovereign nations

Amsterdam's VPRO Backlight and Reggie Middleton on brutal honesty, destructive derivatives and the "overbanked" status of many European sovereign nations

Those who wish to download the full article in PDF format can do so here: Reggie Middleton on Stagflation, Sovereign Debt and the Potential for bank Failure at the ING ACADEMY-v2.

And last but not least, through my own BoomBustBlog...

Although the EU refuses to publish the truth, I have done so freely for blog subscribers and have available a detailed list, currently in its 3rd rendition, that explicitly walks though what will probably happen as any combination of the PIIGS group defaults.

Our most recent subscriber document explores the banking side of Greek failure - European Bank's Greece exposure, but I have put a significant amount of info into the public domain as well. If one were to even come close to marking the EU banks books to reality, market prices, or anything in between, the Lehman situation would look tame in compariosn! As excerpted from the subscriber document:  The Inevitability of Another Bank Crisis

Then there's the obvious twists from other impetuses:

•  It Should Be Obvious To Many That The Risk Of Defaulting Sovereign Bonds Can Spark A European Banking Crisis

• For Those Who Failed To Heed My Warnings On Portugal, Visualize The Contagion That Causes European Bank Failure!!!

And in the End, What Does It All Mean?

LGD 100+: What's the Possibility of Certain European Banks Having a Loss Given Default Approaching 100%?