What hope is there when even the newspaper writers, the specialists, don\’t understand what is going on?
Richard Tyler is the Telegraph\’s (both daily and Sunday) \”Enterprise Editor\”.
European leaders remain under immense pressure to provide more detail about the terms of last week\’s refinancing proposals, which are set to cut Greek debts by 50pc, and see a €100bn recapitalisation of eurozone banks.
No, Greek debts are not set to be cut by 50%.
Foreign private sector holders of Greek debt are to be asked to take a 50% cut, yes. But said foreign, private sector, holders of Greek debt do not hold even a majority of Greek debt.
The others, the public sector holders, the Greek banks (I think, the reason being that if they took the haircut they would immediately be bust, requiring Greece to recapitalise them thus raising the debt again) are not taking a haircut.
Thus Greek debt is to be cut by perhaps 20%: which isn\’t enough. If Greek debt was to be cut by 50% then the Greek problem, the one of the country\’s solvency, would be over, done and dusted.
But the debt ain\’t being cut by that much and the problem ain\’t over.
This isn\’t a trivial detail folks, for because the solvency problem ain\’t over we\’re going to have to revisit this in a few months or years.
And if those who write the newspapers don\’t know all of this then what good are those who write the newspapers?
I think it is more of a non-event than that. The banks are being offered a swap of one issue of debt for another with a lower face value but higher coupon. Economically there is probably very little difference to the banks , and likewise for the Greek taxpayer, but the politicians get to trumpet this as a debt reduction.
What is unclear is whether the politicians know what they are doing and are pulling the wool over the eyes pof the public, or whether they are just to stupid to understand the issues. Probably a bit of both.