ECB Sweats Greek Default
While I was traveling in Europe, the big local story was Greece. Now that I'm back, I noticed this story in my notes from before my trip. Check out this from Bloomberg News:
May 24 – Bloomberg (Mark Deen): “European Central Bank Governing Council member Christian Noyer ruled out a restructuring of Greece’s debt, calling it a ‘horror story’ that would leave the nation shut out of financing for years. ‘There’s no solution possible’ for Greece other than to follow its austerity program, Noyer told reporters… ‘Restructuring is not a solution, it’s a horror story,’ and if the country fails to meet the terms of its bailout, Greek government debt will be ‘ineligible as collateral’ at the ECB.”
What's wrong with this picture?
For one thing, the idea that a "restructuring" (meaning Greece defaults on its bonds - either totally, or they stop paying interest, or they only pay something less than 100 cents on the dollar (or Euro) when the bonds mature) would "leave the nation shut out of financing for years" strikes me as absurd. Countries who, in the past, defaulted on their bonds started borrowing money pretty quickly - maybe a year, if not less. Argentina stiffed its lenders a few years back, and they were borrowing again in no time.
The "horror story" this guy is referring to is what happens to banks who hold this debt. It's the banks he's worried about here.
As for the "austerity" program, that's something that hits the Greek people, not the banks. So the idea is to let the Greek people sweat, not the bankers.
Of course, you can say that the Greek people should have known that the ridiculous benefits promised to them by their government were simply not financially viable. They should have known (how could they not?) that the government was borrowing too much to pay for the public works pension benefits, health care, and all the rest. So if they have to sweat, it's not like I'm reduced to tears thinking about them.
But the fact is this guy Noyer and the European Central Bank are sweating over their banker buddies take a hit. Period.
As for the Greek people, whether you think they've been spoiled, or mislead, or whatever, they're acting up now. The demonstrations we're seeing are getting more dicey, even violent. Do you think they'll go away? I don't. I just hope we're not going to see the sort of violence we've seen in countries like Syria and Yemen.
May 24 – Bloomberg (Mark Deen): “European Central Bank Governing Council member Christian Noyer ruled out a restructuring of Greece’s debt, calling it a ‘horror story’ that would leave the nation shut out of financing for years. ‘There’s no solution possible’ for Greece other than to follow its austerity program, Noyer told reporters… ‘Restructuring is not a solution, it’s a horror story,’ and if the country fails to meet the terms of its bailout, Greek government debt will be ‘ineligible as collateral’ at the ECB.”
What's wrong with this picture?
For one thing, the idea that a "restructuring" (meaning Greece defaults on its bonds - either totally, or they stop paying interest, or they only pay something less than 100 cents on the dollar (or Euro) when the bonds mature) would "leave the nation shut out of financing for years" strikes me as absurd. Countries who, in the past, defaulted on their bonds started borrowing money pretty quickly - maybe a year, if not less. Argentina stiffed its lenders a few years back, and they were borrowing again in no time.
The "horror story" this guy is referring to is what happens to banks who hold this debt. It's the banks he's worried about here.
As for the "austerity" program, that's something that hits the Greek people, not the banks. So the idea is to let the Greek people sweat, not the bankers.
Of course, you can say that the Greek people should have known that the ridiculous benefits promised to them by their government were simply not financially viable. They should have known (how could they not?) that the government was borrowing too much to pay for the public works pension benefits, health care, and all the rest. So if they have to sweat, it's not like I'm reduced to tears thinking about them.
But the fact is this guy Noyer and the European Central Bank are sweating over their banker buddies take a hit. Period.
As for the Greek people, whether you think they've been spoiled, or mislead, or whatever, they're acting up now. The demonstrations we're seeing are getting more dicey, even violent. Do you think they'll go away? I don't. I just hope we're not going to see the sort of violence we've seen in countries like Syria and Yemen.
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