tag:blogger.com,1999:blog-5882645467378797266.post6368669037064592247..comments2023-07-17T11:55:51.363+02:00Comments on ObservingGreece: Closing 2011 with a minority viewkleinguthttp://www.blogger.com/profile/12491174042954678023noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-5882645467378797266.post-33426921977379917912012-06-11T16:51:50.149+02:002012-06-11T16:51:50.149+02:00I strongly feel that the ENTIRE debt of Greece sho...I strongly feel that the ENTIRE debt of Greece should have remained in place without any haircut. It is simply against all principles of responsible finance to make a haircut on sovereign debt after only a few years of crisis. <br /><br />The entire debt should have been split into 2 portions:(a) the "manageable debt" (for example the Maastricht portion of 60%) and (b) the remainder.<br /><br />The manageable debt should have been rescheduled out to normal periods (20-30 years). The remainder as "evergreen bonds" (for example 99-year bonds like Mexico recently). <br /><br />The cash interest payable should have been set in form of a variable rate such as a percentage of government expenditures. The amount of interest demanded by creditors but above this cap should have been capitalized. Then the question would have been how much of total interest to allocate to manageable debt and the remainder.<br /><br />Where is the trick? The trick is that no one would expect the remainder to ever get paid 100%. At the outset it might trade at not much more than zero percent. But if the Greek economy can be saved and turned around that way, this debt would eventually trade at higher rates. And if, at the end of the day, it traded at 20%, creditors would have made a killing relative to a haircut. A lender who agrees to a haircut has no longer an incentive. If he holds a bond trading at near-zero but with the potential of going to 20%, he has a huge incentive.<br /><br />Fresh Money always come separate from a reschedulng but is part of the overall negotiating package. Normally, Fresh Money is brought up by existing creditors on a pro-rata share of their exposure. Given the exposures involved, this would have been far too much for creditors. Thus, it would have been quite defensible that Fresh Money (to finance the agreed-upon budget deficit, but nothing else) should come from public sources (Troika).<br /><br />Bottom line: risk-takers (original lenders) would have remained risk-carriers, one of THE principles of lending! Tax payers would only have been called upon to finance only Greece instead of bailing out the entire European banking sector. And Greece would have had the breathing space it needed.kleinguthttps://www.blogger.com/profile/12491174042954678023noreply@blogger.comtag:blogger.com,1999:blog-5882645467378797266.post-79036660359783002452012-06-11T08:36:47.316+02:002012-06-11T08:36:47.316+02:00"Rescheduling" = debt stays with origina..."Rescheduling" = debt stays with original creditor, its maturities are moved way into the future but creditors maintain 100% legal claim.<br /><br />"Haircut" = creditors forgive part or all of their claims once and for all.<br /><br />See my Post "Default, bankruptcy, etc."kleinguthttps://www.blogger.com/profile/12491174042954678023noreply@blogger.comtag:blogger.com,1999:blog-5882645467378797266.post-42856917931558646982012-06-10T21:41:23.775+02:002012-06-10T21:41:23.775+02:00Somehow I don't quite get it: Was the Greek de...Somehow I don't quite get it: Was the Greek debt, in your opinion, to be reduced or not?<br /><br />Maybe my English, or my knowledge of technical terms, isn't good enough. <br />But what is the difference between "rescheduling debt" and "private sector participation" on the one hand, and "haircut" (that you dismiss) on the other?Cangrandehttps://www.blogger.com/profile/15886612960494544505noreply@blogger.comtag:blogger.com,1999:blog-5882645467378797266.post-57088491004654964212012-01-14T11:16:19.166+01:002012-01-14T11:16:19.166+01:00Dear Sir,
many thanks for your effort in presenti...Dear Sir,<br /><br />many thanks for your effort in presenting a picture of this crisis that, obviously, affects dramatically interests with the power to influence the mainstream of worldwide media opinions.<br /><br />Your germanic heritage witness a longstanding evidence of noble personalities that do not accept to minimize their opinion to pay respect to a "dorfishe" self-interest. <br /><br />I am pretty sure why I present things like this, even not being of Greek origin, in fact I am Italian.<br /><br />It is a shame personalities like you do not write technically policy maker suggestion for the coming months. I understand how often skilled individuals feel that nobody will listen to their opinion and advise because others weak-back characters are the only allowed to seat at the right desk of power. <br /><br />In my humble opinion voices like yours, anyway, represent a witness of how things may be dealt in a different way which, alone, cover of shame those sturdy and arrogant characters the "system" put in charge!<br /><br />I will be deligthed to ear more from your side.<br /><br />Hochactungsfoll,<br /><br />Francesco Gerardi,<br />fgerardi2004@yahoo.comAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-5882645467378797266.post-69935813010923913822012-01-13T16:06:39.267+01:002012-01-13T16:06:39.267+01:00Good analysis.
The worryign thing is that this is...Good analysis.<br /><br />The worryign thing is that this is common sense stuff. The crisis was blown out of all proportion and the EU leaders first over dramatised the situation, caused panic in the markets and cut Greece loose to negotiate the economic storms that followed. <br /><br />I suspect some of this was as a result of some EU nations enjoying the distraction from their own ecomonic issues. <br /><br />MK - Greece/CyprusAnonymousnoreply@blogger.com