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Plan B for Greece
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Bondholders and the Greek government are stalled in talks and waiting for Germany and the IMF to come up with the 14.5 billion euros that is due on March 20, 2012. It may suit the bondholders holding out for a higher interest rate in the 4-5% range for the new bonds to be issued at 50% of face value with long term maturities, but is bad for Europe. This Journal editorial points out that this is bad for European taxpayers and points to other steps that can be taken which are being discussed in European circles. One step is for acollective action clause to be inserted for the existing Greek bonds under which all bondholders have to accept losses if two thirds of the bondholders agree to accept losses. To ensure the safety of the Greek banking system Greece would restructure the bonds held by Greek banks so that they continue to be acceptable as collateral with the ECB, and issue new bonds to the ECB with face values, interest rates and maturities matching existing holdings. The idea is to make it possible for Greece to reduce its total debt and its debt servicing costs- which is really the only way out of the crisis. The ECB and Greece would use the collective action clause to restructure the Greek debt to reduce interest and debt servicing costs on new bonds to be issued. The Journal editorial says it should also mean Greece and the ECB are not required to put up the 30 billion euros in up-front cash that was agreed to in a poorly devised agreement in 2011.
Debt Restructuring for Greece- 2010-2012
04/18/2011
Grouped Articles
Policy âTroikaâ for Europe Financial Woes at Odds
New York Times 06/07/2013
Watch Athens, Not Paris, This Weekend
Wall Street Journal 05/04/2012
Expectations Grow for Greek Debt Restructuring
New York Times 04/18/2011
Wall Street Journal 04/20/2011
Investors Doubt Orthodoxy on Greek Debt
Wall Street Journal 05/02/2011
Greek Debt Talks Widen Divisions in the Euro Zone
Wall Street Journal 05/05/2011
Greece's debt crisis in 2012 after the agreement with private creditors to take 50% of the losses on Greek bonds is not enough to reduce debt to sustainable levels
06/30/2011
Bondholders accepting 50% of losses- as agreed with EU leaders in Nov-Dec 2011 -will not be enough for Greece to meet its debt obligations, because of a fast deteriorating economy. By March 20, 2012, 14.5 billion euros of bonds come up for repayment or refinancing. More money will be needed from the EU. The voluntary exchange by private creditors of existing bonds for new bonds with 50% face value and maturing over a longer period will be made under an agreement using English law. This will be harder to change in the future, putting the burden on any future financing shortfall on EU countries unwilling to make further commitments to Greece.
Grouped Articles
Greek Bonds Soar After Fitch Upgrade
Wall Street Journal 05/15/2013
EU Dismisses IMF's Criticism On Greek Bailout
Wall Street Journal 06/07/2013
Policy âTroikaâ for Europe Financial Woes at Odds
New York Times 06/07/2013
Greek Government Bonds Pay Off Big for Fund Managers
Wall Street Journal 10/28/2013
Europe Fears Rising Greek Cost
Wall Street Journal 01/11/2012
Wall Street Journal 01/14/2012
The growing debate over bondholder haircut, easy money policies, sacrifices, and austerity policies.
11/25/2010
This debate puts British prime minister Cameron, and German chancellor Angela Merkel, on one side, with US President Obama, US central bank chairman Bernanke and other leaders on the other side. The blanket Irish guarantee of all Irish bank debt is an example of improper action that could have prevented the need for an Irish bailout, when guaranteeing only retail Irish bank debt would have worked. Merkel has insisted on bondholders sharing in bank losses, and tougher action required for countries receiving bailouts.
Grouped Articles
A Crisis Needing More Sacrifice
New York Times 11/25/2010
Crises Shake German Trust in Euro Zone
New York Times 11/26/2010
EU Outlines Bond Restructuring Plan
Wall Street Journal 11/28/2010
Europe Backs Irish Rescue and New Rules on Bailouts
New York Times 11/28/2010
Wall Street Journal 12/02/2010
'Contagion' and Other Euro Myths
Wall Street Journal 12/02/2010
Greece's banks and the debt crisis
06/14/2011
Grouped Articles
Piraeus Bankâs Michalis Sallas Reaches the Top in Greece
New York Times 06/10/2013
In Greece, Banks Ask E.C.B. for Access to Emergency Aid
New York Times 01/16/2015
American Billionaire Makes Risky Bet on Greece Debt Deal
New York Times 06/09/2015
Wall Street Journal 07/04/2015
Collapse of Greek Bailout Deal Brings Surprise Boost to German Coffers
Wall Street Journal 07/04/2015
Greek Bank Vortex Threatens Deal Hopes
Wall Street Journal 07/06/2015
The logjam between the bondholders (mostly French and German banks) and the German government- 2010-2012
07/01/2011
The roots of the Eurozone financial crisis go back to the issue of who should pay for the excess lending of French and German banks. Will it be the German taxpayer or the banks that took excessive risks? German financial experts, the German government and parliament, German public opinion, are all adamantly opposed to letting the banks off without sharing at least 50% of the costs of a bailout. A review done by the European Commission in coordination witht he IMF and the ECB, shows that from May 2010 (the date for the inception of the aid program to Greece) to September 2011, $52 billion of the $91 billion loaned to Greece went to pay bondholders for bonds that came due. The July 2011 EU agreement for Greece called for 21% of losses to be allocated to the bondholders. The German government is pushing for 50% and German parlamentary leaders in Merkel's party are balking at anything less.
Grouped Articles
Wall Street Journal 07/13/2011
New York Times 04/13/2013
Policy âTroikaâ for Europe Financial Woes at Odds
New York Times 06/07/2013
Most Greek bailout money has gone to pay off bondholders - The Washington Post
Washington Post 10/23/2011
Dexiaâs Collapse in Europe Points to Global Risks
New York Times 10/22/2011
European Officials Shaping Greek Rescue and Effort to Aid Banks
New York Times 10/22/2011
Germany's insistence that bondholders bear losses in any future EU bailouts.
11/28/2010
Grouped Articles
Europe Backs Irish Rescue and New Rules on Bailouts
New York Times 11/28/2010
Wall Street Journal 12/02/2010
'Contagion' and Other Euro Myths
Wall Street Journal 12/02/2010
Government debt: Behold 2011, the year of sovereign shocks
Economist 12/18/2010
Europe Needs to Apportion Pain
Wall Street Journal 03/17/2011
Plan for Greece Favors Creditors
New York Times 07/25/2011
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