"We know who the Lehman is (Greece), but we don't know who the AIG is". (Well, actually it appears to be French banks, but Sterling should get to watch the dominoes fall within the next 24-48 hours)
By Ambrose Evans-Pritchard, International Business Editor
First we learn from planted leaks that Germany is activating "Plan B", telling banks and insurance companies to prepare for 50pc haircuts on Greek debt; then that Germany is “studying” options that include Greece’s return to the drachma.
German finance minister Wolfgang Schauble has chosen to do this at a moment when the global economy is already flirting with double-dip recession, bank shares are crashing, and global credit strains are testing Lehman levels. The recklessness is breath-taking.
If it is a pressure tactic to force Greece to submit to EU-IMF demands of yet further austerity, it may instead bring mutual assured destruction.
"Whoever thinks that Greece is an easy scapegoat, will find that this eventually turns against them, against the hard core of the eurozone," said Greek finance minister Evangelos Venizelos.
Greece can, if provoked, pull the pin on the European banking system and inflict huge damage on Germany itself, and Greece has certainly been provoked.