Greece\’s debts are still unsupportable, even though the country is relieved of half of them.
This is nonsense, tripe. Why is this man paid to write columns?
Greece has not been relieved of half of its debts.
Leave aside his opinions in this column (erm, current travails in the eurozone show that Britain should join it) and concentrate just for a moment on facts.
The Greek bailout gives a 50% haircut to private sector holders of Greek debt. It gives a 0% haircut to public sector holders of Greek debt.
Given that public sector holdings of Greek debt are around and about 50% of the total outstanding, the bailout relieves Greece of 25% of the debt burden.
Which isn\’t enough.
These numbers are well known, anyone who reads the FT for example will be aware of them.
So why are we getting columns about the bailout which don\’t even understand the basic maths of the bailout?
morning Tim – I see 100 “leading economists” have written to the Observer demanding more borrow and spend/further stimulus (delete as applicable)
http://www.guardian.co.uk/theobserver/2011/oct/30/observer-letters-economists-george-osborne
Nice to see the usual NEF suspects including Murphy in there (NB not economists) as well as a former head of strategy for Labour’s Treasury comms unit
Does the 50% haircut for the banks affect the coupon or just the principle? Does it save the Greek government any ongoing interest payments or does it just affect their repayments of capital?
This prejudicial scalping of private bondholders (which would be illegal had the bonds been issued under UK law) must be doing wonders for the credibility of those public sector bondholders such as the ECB, the EFSF, etc. who are still carrying Greek bonds on the books at par.
Flatcap Army – “Nice to see the usual NEF suspects including Murphy in there (NB not economists) as well as a former head of strategy for Labour’s Treasury comms unit”
Yeah because nothing says credibility like a PR shill. I am also fond of the fact they have double counted some people. Not to mention the usual round up of non-economists.
Heather Savigny? “During her Phd she taught at the Universities of Staffordshire, Keele and Birmingham in the areas of politics, media, and sociology.” Not an economist I am guessing.
Prof the Baroness Ruth Lister of Burtersett, Loughborough University? Emeritus Professor of Social Policy.
Prof Alan Finlayson, University of East Anglia? Well he must have got a new job, but in his old life his academic areas of interest were “Political theory, British Politics, Labour Politics, Conservatism, Northern Irish politics, rhetoric, media, communication, poststructuralism, discourse theory, democratic theory, continental political thought, asset-based welfare, cultural theory, cultural studies, interpretive methodologies.”
If the budget is tight I have some suggestions for academics to be sacked, departments closed and even entire Universities returned to whatever brown field toxic waste dump they were before they became really noxious.
Out of curiousity, how fixed is this haircut? How many private sector investors have signed up? What happens with the ones that don’t agree?
“So why are we getting columns about the bailout which don’t even understand the basic maths of the bailout?”
They really should head his column “Oor Wullie”, then we’d be warned of the intellectual level involved.
Jim,
NPV haircut is 60%, so yes, it does affect interest payments.
But the devil will be in the detail, and my guess is that the eventual amount written off will be around 20%. Given that Greek bonds are trading at around 35% of par, the haircut looks like quite a good deal for banks. Greece would do better to default.
Tim
To be fair to Woolly Willy, he says of the sentence you quote above: “So the received wisdom goes” So he’s not arguing for this as such.
“Willy doesn’t even get the math of the Greek bailout”
It’s “mathS”, Tim, unless you’re a septic…