Financial Times
May 13, 2012
So the last shall be first, and the first last: for many are called, but few chosen
Matthew 20:16 (King James version)
No one really thinks of the euro area as “Christendom”, as they might have a century ago, but if there were ever a time for its bondholders to get religion, this would be it. After all, as what were thought of as material “facts”, such as sovereign guarantees and written contracts, dissolve in front of them, what is left besides transcendent faith?
And whatever your beliefs may be, those words above from the New Testament now seem rather prophetic, with respect to who gets paid what and when in the euro area.
Specifically, sets of creditors who once thought of themselves as undoubtedly first in line are now having their doubts.
Let’s consider Greece and Spain.
At the time when the Greek-forced writedown of private sector bonds was being imposed less than two months ago, there were open threats of a complete cessation of payments to any “holdouts”, or bondholders who refused to take the new “PSI” (private sector involvement) bonds, with their forced reductions in principal and stretchouts of maturity.
Can’t pay, won’t pay, to use a slogan of Seventies Italian radicals.
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