The Greek Can At the End of the Road?

An adviser to German Finance Minister Wolfgang Schaeuble has told a Greek paper that the 50 percent haircut deal (PSI) is no longer operative:

The planned 50 percent writedown of Greek government bonds held by private creditors as part of a debt swap won’t be enough to make the country’s debt sustainable, an adviser to German Finance Minister Wolfgang Schaeuble told To Vima in an interview.

The write down, which aims to lower Greece’s debt to 120 percent of gross domestic product in 2020, will have to be greater and shouldn’t be voluntary, Oxford University professor Clemens Fuest told the Athens-based newspaper.

I’ve just seen on Twitter a 60 percent number being batted around–no link as of yet.

In addition to the scuppering of the 50 percent “deal” agreed to in October, the significant part of this statement is that the haircut shouldn’t be voluntary.  This suggests that governments are tiring of the negotiations, and believe that immediate action is necessary.  Indeed, given the horror with which Euro officialdom had previously contemplated the possibility of an involuntary haircut of this magnitude–which would trigger CDS, if ISDA wants to maintain a shred of credibility–this drip-drip-drip of leaks indicates that said officialdom recognizes that the can has arrived at the end of the road.

About Craig Pirrong 238 Articles

Affiliation: University of Houston

Dr Pirrong is Professor of Finance, and Energy Markets Director for the Global Energy Management Institute at the Bauer College of Business of the University of Houston. He was previously Watson Family Professor of Commodity and Financial Risk Management at Oklahoma State University, and a faculty member at the University of Michigan, the University of Chicago, and Washington University.

Professor Pirrong's research focuses on the organization of financial exchanges, derivatives clearing, competition between exchanges, commodity markets, derivatives market manipulation, the relation between market fundamentals and commodity price dynamics, and the implications of this relation for the pricing of commodity derivatives. He has published 30 articles in professional publications, is the author of three books, and has consulted widely, primarily on commodity and market manipulation-related issues.

He holds a Ph.D. in business economics from the University of Chicago.

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