Main focus of Thursday, March 8, 2012

Greece holds breath over debt restructuring

Athens will announce success or failure on Friday morning. (© AP/dapd)

The deadline for the Greek debt restructuring runs out today, Thursday, at 9 pm. Around half of the holders of Greek bonds have already signalled their willingness to accept a write-down, but Athens is hoping to achieve an approval rate of 75 to 90 percent. In any case debt restructuring will be cheaper than insolvency, commentators write, even if it means yet another home stretch without home in sight.

Home stretch without home in sight

The fact that the negotiations on the debt restructuring are entering their final stages certainly doesn't mean that the goal has been achieved, writes the business paper Il Sole 24 Ore: "However the race ends, there won't be a great sense of relief when it's over. Because the dividing line of national financial markets still runs between the 17 states. This is evident from the fact that the crisis hasn't been overcome and confidence hasn't been restored. The integration of the financial markets was the driving force behind Europe's economic system, but after years of weak trust among the individual states, the return of capital investments to their respective country of origin has taken the place of their becoming merged with one another. The money is locked away in the individual states. The economic and financial systems are as impenetrable and encapsulated as they were in the 1970s, with the subtle difference that the governments back then had the task of making decisions about their national currencies and national monetary policies whereas today's governments must decide on a common currency and policy." (08/03/2012)

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Debt cut cheaper than state bankruptcy

Athens has proposed that private lenders exchange their current Greek bonds for new ones with a nominal loss of 53.5 percent. Investors should accept the offer despite the high losses or their costs will run even higher, writes the president of the Society of Polish Economists, Ryszard Petru, in a commentary for the liberal daily Gazeta Wyborcza: "The investors will suffer losses no matter what the scenario. Consequently it seems there is no other option but to accept these losses. The banks are still in the negotiating phase with the Greek government, which wants to impose concrete terms. But we should bear in mind that it would be even worse if the situation got out of control and Greece suffered a disorderly bankruptcy. The markets would panic and the risk for banks would be extremely hard to assess." (08/03/2012)

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Voluntary restructuring better than forced

If an insufficient number of investors voluntarily go along with the Greek debt restructuring, the Greek Finance Minister Evangelos Venizelos has said he would force them to adopt the plan by resorting to certain debt restructuring clauses,  the so-called Collective Action Clauses. The banker Georges Ugeux warns against such a move in his blog Démystifier la finance: "That would be tantamount to dropping a nuclear bomb whose explosion would have dramatic consequences far beyond Greece's borders. The entire financing of the European states would lose its credibility and the trust of investors. Such a move could jeopardise the noteworthy alleviation of the Italian and Spanish debt crises achieved in recent weeks. ... The IMF puts the losses in the case of a Greek insolvency at one trillion euros and reminds us that the contagion effect would be enormous: it's not certain whether it could be contained at all." (07/03/2012)

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Creditors afraid of smooth debt write-down

Greece is threatening not to pay back any of its debts to creditors who refuse to approve the debt restructuring plans. The commotion this is causing on the markets could actually have a positive result, writes the business paper Cinco Días: "The challenge from Athens is frightening the markets, but a minor outbreak of panic could prompt the doubters to jump on board. By warning that it doesn't have any money for those who reject the debt restructuring, Greece clearly wants to force them to sign. … However the major concern of the creditors is perhaps not so much that debt conversion will lead to chaos but rather that it will go all too smoothly. Because this could lead the administrators of the Eurozone to try out the same approach with other problem states, in particular Portugal. Taboos are no longer taboos once they have been broken." (08/03/2012)

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