Barron's
November 5, 2011
Greece is on the way to default, sooner or later. Even Prime Minister George Papandreou's vow on Friday to step down and form a coalition government won't be able to stave it off.
The dam burst early last week, days before the government won a parliamentary vote of confidence on Friday.
First was the move by Greece's Prime Minister George Papandreou to put fiscal austerity -- a requirement for all financial support offered to Greece so far -- to a national referendum.
Second was an opinion issued by the International Swaps and Derivatives Association, which sanctions derivative financial products, that the 50% haircut demanded of Greece's creditors appears to be "voluntary." Voluntary haircuts would not be considered credit events and will not trigger credit-default swaps. In other words, banks and others who bought those instruments as protection for their holdings of Greek debt may be plumb out of luck.
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