Pretty easy to do really, when you decide to use someone else\’s money:
The agreement, which has yet to be accepted by either Greece or the bail-out\’s donors, has been greeted as a crucial step forward in resolving the crisis and was drafted at a summit of creditors in Rome ahead of the Greek parliament\’s crucial vote on its austerity package tomorrow.
However, Mr Sarkozy\’s proposal is likely to set him on a collision course with Germany because it involves using Brussels-backed funds to reduce potential losses of private bondholders.
Although he said banks had agreed to \”roll over\” 70pc of the debt that matures before 2014 into new 30-year bonds, under the terms of the deal 20pc would go into AAA-rated assets fully protected against a Greek default and likely to be guaranteed by the European Financial Stability Fund (EFSF).
Using someone else\’s money without even asking them in fact.
For the EFSF is your and my money (don\’t for a moment believe that it\’ll end up just being eurozone taxpayers).
As to the larger point, having to \”persuade\” private sector creditors to accept losses, what, actually, are they on about?
I can\’t imagine that there\’s a single private sector creditor who doesn\’t already acknowledge that there is indeed a loss on their holdings of Greek bonds. The price in the market tells us that.
Some bonds are trading at 40% of par. Anyone who believed that there would be no default, with no loss of capital, would be buying those, driving their price back up to par. They\’re not: therefore everyone is accepting that there will be a loss.
So what is this whole kabuki of trying to persuade people to take a loss? Everyone already has taken a loss.
What is the political point that I\’m missing?