Beware of the Greek obligor

The obligor - it does sound a bit like a mythical Greek monster.
One credit rating agency changes its opinion and all of a sudden... the world markets are on the slide.
The recession has weakened institutions and weakened confidence in those institutions to such an extent that - in this interconnected and enmeshed system - one small post wobbling in the barn is enough to frighten the horses into a stampede.

Business Week: from the S&P statement -With Germany refusing to issue blank cheques to the Greeks in order to preserve the discipline of the Euro zone they now look forward to this bleak scenario:

Damaged Collateral

“Eventually the Greek banks could run out of additional collateral acceptable to the ECB/Eurosystem,” Buiter said. “Their funding needs are likely to be exacerbated by a withdrawal of deposits that could become a run.”

If Greece’s lenders run out of collateral and suffer an outflow of deposits, the ECB would have “to reduce the minimum quality threshold on securities acceptable as collateral, currently BBB- or the equivalent, or refuse to lend to the Greek banks,” Buiter said. That would spark “a funding crisis and possible bank failures,” the Citigroup economist said.