by Joseph Cotterill
Financial Times
January 13, 2012
If you didn’t believe us that the European Central Bank will do everything it can to achieve seniority for its Greek bonds in the country’s debt restructuring, hopefully Thursday’s ECB press conference convinced you.
Not only did ECB chief Mario Draghi obsfuscate — twice — on whether the bank is prepared to take losses on its Greek debt, but Vitor Constancio, the vice-chief, made a point of emphasising that Greece is negotiating private sector involvement.
The implication being that the ECB’s €40bn-plus holdings should not be seen as private, despite having originally been issued by Greece as private bonds. (The ECB bought the bonds in the secondary market.) Since that suggests the ECB shouldn’t be affected by any attempt to coerce private bondholders to write down their €205bn debt by 50 per cent, there’s a bit of a problem here...
...Mostly to do with the old principle of equality of treatment among creditors in sovereign debt restructuring. The threat to this principle is why the ECB’s role is important. It’s why so-called retro-active collective action clauses are a problem, given that they’d affect all Greek-law bonds (including the ECB’s) unless there’s a procedure to exclude the ECB. Which brings us back to creditor inequality, etc.
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