Last updated at 17:30 BST, Monday, 26 September 2011

Banks get ready for Greek failure to pay debt

Summary

26 September 2011

There are widespread reports that leading economies are considering allowing Greece to fail to pay their international debts. It comes ahead of an important meeting between the boss of the International Monetary Fund and the finance minister of Greece.

Reporter:
Michelle Fleury

National Bank of Greece

The National Bank of Greece

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Report

At meetings here in Washington, the group of twenty leading nations have been working on plans to deal with the potential damage from a Greek default.

A lot of their efforts have been focused on the banking system. If Greece were allowed to go bust, the bonds that banks hold would become worthless.

German and French banks are most at risk. So there's been lots of talk here in Washington on how to inject more capital to shore them up.

The other big worry is that if Greece defaulted, the financial markets would start turning on other countries. If Italy or Spain were to come under pressure, those here say there isn't enough cash available to help them.

That's why finance ministers are working on building a firewall around Greece to stop the situation from getting that far.

Michelle Fleury, BBC News

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Vocabulary

default

failure to pay back debts

to go bust

to go bankrupt, to have no money to pay debts

bonds

certificates of debt issued by a government or corporation

worthless

of no value

at risk

exposed to the possibility of losing money

to inject

to introduce, to put into

to shore them up

to support them

turning on

attacking or criticizing suddenly and unexpectedly

to come under pressure

to be affected by the crisis

a firewall

a barrier to prevent the spread

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