Wall Street Journal
October 28, 2011
Fatta la legge, trovato l'inganno. "Make the law and a way will be found around it." The Italian proverb is a sadly apt footnote to the latest round of European shenanigans.
As the stock market and the euro celebrated a deal on Greek debt that maybe, just maybe, could put an end to two years of bumbling procrastination, a bitter irony emerged from the 15-page statement penned by bleary-eyed bureaucrats Thursday.
After spending the aftermath of the financial crisis hogging the moral high ground and criticizing "Anglo-Saxon capitalism" for its penchant for financial engineering and excessive leverage, European Union leaders employed some of the same devices for Greece.
The plan was passed, but not without getting around some of the principles outlined after the 2008 debacle.
Take the idea—central to a solution of Greece's woes—that the country will undergo a "controlled default" in which banks and other debt holders would "voluntarily" agree to shoulder a 50% reduction in the value of their securities.
That is financial engineering at its most Machiavellian. The deal is designed to avoid triggering the payment of credit-default swaps on Greek debt, the much-maligned securities meant to insure against precisely this kind of scenario.
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