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by Atropos 4465 days ago
That may be the official US/UK media narrative, but it is nonsense to anyone who looks at the underlying data. Do you realize that a restructuring of Greece debt has already happened with Greece private creditors incurring around 53.5% face value losses? And guess what - the Eurozone is fine. Furthermore Greece GDP and banking is tiny compared to the Eurozone. Does sharing the same currency mean that mean that the USA is forced to bail out the city of Detroit?

If the mantra "Same currency - responsible for all debts" was true, it would be impossible to explain why the yields of German/Austrian/Finnish bonds are trading at a vastly different level than the Italien/Spanish/Portuguese etc... bonds!
3 comments
jpollock 4465 days ago
It's not about Greece, it's about Greece, Spain, Portugal and Italy and then possibly France.
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dageshi 4465 days ago
It was the precedent that mattered not the size of the Greek economy, in the same way that the size of Lehman brothers in the US didn't matter individually but the precedent that the US government would no longer write blank cheques to bailout failing institutions did. With Greece the precedent was set that what "NO BAILOUT" actually meant was "NO BAILOUT" if the problem is small enough to not impact anyone else.
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waps 4465 days ago
I think the big elephant in the room argument is right. They legislated their debt out of existence, and ... the market didn't care.

So the US can do the same, with the same result. Declare all US debt/treasuries to only have 50% of the nominal value. Immediate result : large drop, followed by recovery. Longer-term result : nothing.

So the Cyprus and Greece crises made this a valid policy option. It doesn't look like it will be necessary any time soon, but it has gone from inconceivable to "will happen at some point in the future".

The market doesn't actually want you to pay back your debt. They care, but not enough for real consequences for the debtor. Why ? Simple : there's no other place to put money if you have very low interest rates everywhere.

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pessimizer 4465 days ago
>it would be impossible to explain why the yields of German/Austrian/Finnish bonds are trading at a vastly different level than the Italien/Spanish/Portuguese etc... bonds!

Only if one doesn't understand the difference between a debtor and a lender. The common currency helps the core, and hurts the periphery. Where's the contradiction?

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