{"id":16822,"date":"2010-05-06T12:32:00","date_gmt":"2010-05-06T09:32:00","guid":{"rendered":"http:\/\/thessalika-nea.gr\/wordpress\/?p=16822"},"modified":"2010-05-06T12:32:00","modified_gmt":"2010-05-06T09:32:00","slug":"blog-post_5566","status":"publish","type":"post","link":"https:\/\/thessalika-nea.gr\/?p=16822","title":{"rendered":"\u039a\u03b1\u03bb\u03b7\u03bd\u03c5\u03c7\u03c4\u03b1 \u03b5\u03c5\u03c1\u03c9… \u039a\u03b1\u03bb\u03b7\u03bc\u03b5\u03c1\u03b1 \u0394\u03c1\u03b1\u03c7\u03bc\u03bf\u03c5\u03bb\u03b1 \u03bc\u03bf\u03c5 \u03c0\u03b1\u03c1\u03b1\u03c0\u03bf\u03bd\u03b5\u03bc\u03b5\u03bd\u03b7!!!"},"content":{"rendered":"

Greek Default Already Decided<\/h3>\n

By Christopher Emsden<\/h3>\n

The real decision made by euro-zone authorities last Sunday was not to save Greece, but to escort it to a safe house where the country\u2019s massive debt can be cut down to size through a painful restructuring. <\/p>\n

\"\"AFP\/Getty ImagesWillem Buiter, right, talking to George Soros in February 2009. <\/div>\n

That\u2019s the view of Willem Buiter<\/a>, a former member of the Bank of England\u2019s Monetary Policy Committee and frequent consultant to the European Central Bank, who recently joined Citigroup as its chief economist. He\u2019s not making a prediction. He\u2019s saying the decision has already been made. In a note distributed Wednesday he said: <\/p>\n

\u201cA Greek sovereign restructuring with a net present discounted value haircut became unavoidable when the euro area decided not to lend to Greece at something close to the risk-free rate, but at 300 or 400 basis points over the swap rate.\u201d<\/p><\/blockquote>\n

The final \u20ac110 billion rescue package is full of feints. One is that the tough conditionality clauses require Greece to make swingeing fiscal cuts, so that it is running a primary budget surplus in 2013, by which time its gross sovereign debt will have risen to around 150% of GDP. The hopeful rhetoric is that Greece might be able to tap markets at a 5% yield, roughly the marginal term of the rescue package. But even if Greece could issue bonds at 5% in 2013, it would still have to pay 7% of GDP just to pay interest on its debt, a level that spells perpetual stagnation or would require a massive boom in global demand for ouzo and feta cheese. Buiter says that describing Greek debt levels as having been \u201cstabilized at that level is disingenuous\u201d. A mix of huge debt and no primary deficit – i.e. needs for external funds to pay for ongoing government spending – constitute \u201c the exact circumstances that makes a default individually rational for the debtor,\u201d he notes. But his main point is that markets will price in that default risk. This means that, when the bailout package expires at the end of 2012, it will have to be rolled over again, as Greece still won\u2019t be able to obtain feasible borrowing costs. So, even though the roughly 5% rate in the rescue package is strongly subsidized compared to the market, the euro-zone authorities that decided upon it basically decided then and there that Greece\u2019s sovereign debt will be restructured. The later it happens, the larger the haircut will be, says Buiter. He reckons a 30% cut today would have sufficed, but would have wrought havoc on the capital positions of Greek, French and German commercial banks, which would probably need to be recapitalized immediately, provoking major political embarrassment in Berlin and Paris. Instead, Buiter says, the plan must be to give some time to those banks to recapitalize, or sneak Greek exposure off private balance sheets and on to public ones. Expect an announcement in 2011, he suggests.<\/p>\n","protected":false},"excerpt":{"rendered":"

Greek Default Already Decided By Christopher Emsden The real decision made by euro-zone authorities last Sunday was not to save Greece, but to escort it to a safe house where the country\u2019s massive debt can be cut down to size through a painful restructuring. AFP\/Getty ImagesWillem Buiter, right, talking to George Soros in February 2009. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[228],"class_list":{"0":"post-16822","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-1","7":"tag-228"},"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/thessalika-nea.gr\/index.php?rest_route=\/wp\/v2\/posts\/16822","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thessalika-nea.gr\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thessalika-nea.gr\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thessalika-nea.gr\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thessalika-nea.gr\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=16822"}],"version-history":[{"count":0,"href":"https:\/\/thessalika-nea.gr\/index.php?rest_route=\/wp\/v2\/posts\/16822\/revisions"}],"wp:attachment":[{"href":"https:\/\/thessalika-nea.gr\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=16822"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thessalika-nea.gr\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=16822"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thessalika-nea.gr\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=16822"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}