Financial Times
July 10, 2011
The eurozone has headed down many blind alleys in its search for a solution to the sovereign debt crisis. The latest cul-de-sac is the effort to include private investors in a second round of financing planned for Greece, while avoiding a credit event. If the bond market volatility of the past few days suggests anything, it is that contriving such a scenario is impossible. Policymakers should accept that, for Greece, it is too late for a voluntary bail-in of private investors.
About €60bn of Greek debt maturing between now and mid-2014 is held by private investors – mainly European banks and insurance companies. A proposal led by French banks to roll this over and offer Greece €30bn of new financing now appears to be doomed. Investors holding Greek debt have no incentive to participate voluntarily in any rollover, and risk a haircut of 50 per cent. Any effort to bail them in would merely create delays the eurozone cannot afford.
More
No comments:
Post a Comment