Wall Street Journal
May 20, 2011
For the first time this week, a taboo was lifted. European officials can now use the "R" word— restructuring—in sentences that don't also have "not" in them.
Restructuring Greece's government debt—changing the conditions attached to its bonds to lessen the burden—is now something that can be talked about in polite company. (With the proviso that it will be the nicest, gentlest, most-investor-friendly restructuring possible.)
Jean-Claude Juncker, Luxembourg's prime minister, who heads up the meetings of the euro-zone finance ministers, described this as a "soft restructuring" or a "reprofiling." By this, he means finding a way to postpone at least some of the debt repayments—amounting to €66 billion ($94 billion)—Greece must make in 2012 and 2013. If that doesn't happen, Greece's borrowings from other European Union governments and the International Monetary Fund will merely be recycled to pay out private holders of maturing bonds.
The mission is complicated. Euro-zone governments have promised that holders of Greek and other government bonds won't be forced into concessions before mid-2013. They are also trying to avoid triggering payouts of credit default swaps, a type of insurance against bond defaults that are also used by speculators seeking to benefit from falls in bond prices.
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