Voluntary as a Confession During the Spanish Inquisition.

No Winners in Ugly Greek Debt Deal, Only Lessons

Just a few hours ago, as I was starting this post, I came across this blog by Michael Casey at the Wall Street Journal, called “No Winners In Ugly Greek Debt Deal, Only Lessons.” It is very to the point, so let’s look as his opening comments:

“Technocrats in Athens, Berlin and Washington Friday are no doubt congratulating each other for designing a bond swap that slashed more than EUR100 billion off Greece‘s debt mountain.

“But let’s not kid ourselves: the two-year story behind this debt restructuring is an ugly one of politicking and wasted time. There are no winners here, and there are already more losers arising from its far-reaching ramifications.

“There are, however, lessons to be learned from this unseemly string of events. The most important is that our financial system is still trapped by the dilemma posed by Too-Big-to-Fail banks – four years since the U.S. mortgage crisis. Financial sector lobbyists who argue that now is not the time to fix that dysfunctional system should have a thorough reading of the Greece story.

“Officials will crow that a higher-than-expected 83% of Greece’s old bonds was voluntarily tendered into this debt swap and so claim justification for triggering the collective action clauses that will force the remaining holders of Greek law securities into the exchange. But without those CACs hanging like Damocles’ Sword over them, and without the pressure that governments and national central banks brought to bear on banks and pension funds from Greece, Germany and France, would so many have willingly accepted a 73%-plus write-off?

“As Commerzbank CEO Martin Blessing recently put it, this deal was as ‘voluntary as a confession during the Spanish Inquisition.’

“Truth be told, Greece can rightly argue it had no choice but to use coercion. Any less than 95% participation and the European Union would not have approved the latest EUR130 billion bailout, leaving the country unable to pay its bills and thrust into a more damaging, disorderly default.”

And, there’s more to come folks, much, much more.

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About Steve King

iPeopleFINANCE™ Chief Operating Officer. Former CEO of Endymion Systems, Inc. a $36m Information Systems Services company. Co-founder of the Cambridge Systems Group, the creator of ACF2, the leading IBM Mainframe Data Center Security product; acquired by Computer Associates. IBM, seeCommerce, marchFIRST, Connectandsell alumni. UC Berkeley alumni. View all posts by Steve King

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