Greece may sue US over banks

Greece is considering taking legal action against U.S. investment
banks that might have contributed to the country’s debt crisis, Prime Minister
George Papandreou said.

“I wouldn’t rule out that this may
be a recourse,” Papandreou said, in response to questions about the role of U.S.
banks in the crisis, in an interview on CNN’s “Fareed Zakaria GPS.” The
program, scheduled for broadcast today, was taped on May 13. Neither Papandreou
nor Zakaria mentioned any banks by name.

U.S. stocks fell and the euro slumped on concern that Europe wouldn’t be
able to contain the debt crisis stemming from Greece. The Standard & Poor’s
500 Index declined 1.9 percent May 14, while the euro fell below $1.24 for the
first time since November 2008.

Papandreou said the decision on
whether to go after U.S.
banks will be made after a Greek parliamentary investigation into the cause of
the crisis.

“Greece will look into the past and
see how things went,” Papandreou said. “There are similar investigations going
on in other countries and in the United States. This is where I
think, yes, the financial sector, I hear the words fraud and lack of transparency.
So yes, yes, there is great responsibility here.”


In the days leading up to the May
10 announcement of a loan package worth almost $1 trillion to halt the spread
of Greece’s fiscal woes, European Union regulators were examining whether
speculators manipulated the prices of bonds and equities and contributed to the

The Committee of European
Securities Regulators said on May 7 it was investigating “exceptional volatility”
in the markets and would work with other regulators, including the U.S.
Securities and Exchange Commission, as part of a coordinated clampdown.

European Central Bank President
Jean-Claude Trichet said May 6 that he was concerned about speculation in bond
markets using credit default swaps. “By first buying the CDS and then trying to
affect market sentiment by going short on the underlying bond, investors can
make large profits,” he said.

Credit-default swaps are
derivatives that pay the buyer face value if a borrower — a country or a
company — defaults. In exchange, the swap seller gets the underlying securities
or the cash equivalent. Traders in naked credit-default swaps buy insurance on
bonds they don’t own.

In the CNN interview, Papandreou
said many in the international community have engaged in “Greek bashing” and
find it easy “to scapegoat Greece.”
He said Greeks “are a hard-working people. We are a proud people.”