Wall Street Journal
July 23, 2010
As far as the market is concerned, a Greek government-debt default is pretty much baked in the cake.
Greece, the International Monetary Fund, the European Commission and the European Central Bank may refuse to even countenance the D-word. But the cost of insuring $10 million of Greece's debt is currently $770,000 a year, similar to a rock-bottom triple-C credit rating. This investor skepticism may be overdone.
A common argument in the market goes thus: once Greece closes its primary deficit—the deficit stripping out interest payments—it could be in the country's interest to restructure its debt. At that point, tax receipts will cover current spending so there will be no need for immediate spending cuts.
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