by Gene Rotberg
Financial Times
October 11, 2011
Solon, the great Greek lawgiver born in about 635BC, faced a problem. Athenians could not pay their debts. According to Aristotle, Solon “made a cancellation of debts, both private and public, which the Athenians call the shaking off of burdens, since by means of it they shook off the weight lying on them”. Plutarch, writing 600 years after Solon’s death, tells us: “Solon relieved the poor, not by wiping out their debts, but by reducing the interest on them and by . . . the rise in the value of money which took place at the same time.”
So this business in Greece is not a new one. Now, though we can’t claim the wisdom of Solon, we might borrow some of his ideas. Ancient Greeks were very imaginative about calling something palatable when it was really quite painful. Plutarch put it this way: “The Athenians were in the habit of disguising the unpleasant aspects of things, giving them endearing and charitable names . . . Thus, they refer to whores as mistresses, taxes as contributions, garrison cities as guards and the common jail as a residence.” In this spirit, we could call it “the Great Concordat”. It might go like this:
The holders of all bonds and loans outside Greece could exchange their worthless holdings with a consortium of eurozone countries. They would receive, in exchange, new 20-year bonds of the same face value but with the full guarantee of all eurozone countries. The creditors would therefore suffer no loss on their balance sheets or profit and loss statements for they would hold a triple A security. However, the interest rate on these risk-free bonds would be zero. Still, they would suffer “only” an opportunity loss – not shown on their balance sheets or profit and loss statements.
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