FRANKFURT — Only a few weeks ago, the idea that Greece might restructure its debt seemed like the nuclear option. Now restructuring — a polite way of saying “default” — is not only thinkable, but even likely.
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Many economists still regard a full-fledged, Argentina-style default, with investors losing over half their money, as too scary to contemplate. Even a so-called haircut, in which creditors absorb a relatively modest reduction in the face value of Greek bonds, could frighten investors and prompt a sell-off of Portuguese and Spanish debt. That would result in dire consequences for the euro zone and the region’s already beleaguered banks, which hold most of Greece’s government bonds.
A milder alternative — spreading out Greece’s debt payments — is starting to look like the best of an array of bad choices. “Only a multiyear restructuring of the bond obligations, coupled with substantial deficit reduction, can achieve a permanent adjustment of Greece’s fiscal obligations without actually defaulting on the paper and giving all stakeholders a haircut,” Mr. Weinberg said in an e-mail message Sunday.
Mr. Weinberg has proposed converting all Greek bonds due until 2019 into a pool that would be refinanced with 25-year bonds. Assuming a 4.5 percent interest rate, this plan would cut Greek financing requirements by some 60 percent, or €140 billion, he estimated.
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It looks like German public opinion may be forcing Merkel's hand.... but if Germany ends up having to bail out its own banks, taxpayers there might not have saved themselves anything. In fact they might have just made the situation worse for themselves. Let's see how the market handles this.
Also:
"Sixty-five percent of those polled by researcher Alco for the Proto Thema newspaper said the government should reject any measures that lead to more reductions in wages and pensions."
“It’s the IMF, no Greek can be happy about that,” said Christos Hatzianastasiou, 40, a university employee, yesterday. “We could have avoided the IMF but the handling should’ve been different. Pasok said it had a plan and we see that they still don’t have a plan.”
http://www.businessweek.com/news/2010-04-25/papandreou-rescue-request-angers-greeks-as-eu-imf-ready-cuts.htmlWell this is just phucking phantastic. The Germans want the Greeks to pay the Greeks want the Germans to pay. Big surprise.
And HOW should it have handled differently?
How can Greece maintain its current spending level without more austerity if Germany won't support? Have Greeks even given a millisecond's thought to this?
Every other government is now looking at Greece and it has been plainly revealed that if governments want to do well they must lie about their books as long as possible, because there is no reward for being honest.
