“Engineering an Orderly Greek Debt Restructuring”

That paper is by G. Mitu Gulati and Jeromin Zettelmeyer, the link is here, and the abstract is this:

For some months now, discussions over how Greece will restructure its debt have been constrained by the requirement that the deal be “voluntary” – implying that Greece would continue debt service to any creditors that choose retain their old bonds rather than tender them in an exchange offer. In light of Greece’s deep solvency problems and lack of agreement with its creditors so far, the notion of a voluntary debt exchange is increasingly looking like a mirage. In this essay, we describe and compare three alternative approaches that would achieve an orderly restructuring but avoid an outright default: (1) “retrofitting” and using a collective action clause (CAC) that would allow the vast majority of outstanding Greek government bonds to be restructured with the consent of a supermajority of creditors; (2) combining the use of a CAC with an exit exchange, in which consenting bondholders would receive a new English-law bond with standard creditor protections and lower face value; (3) an exit exchange in which a CAC would only be used if participation falls below a specified threshold. All three exchanges are involuntary in the sense that creditors that dissent or hold out are not repaid in full.

We’ll see soon enough.


Listen to everything Ron Artest says and do the exact opposite. Call it the Metta message.

Oopsie, wrong thread. Still applies. Someone ask Ron Artest about Europe.

Looks pretty complicated.

Once again, the lawyers win.

The lawyers always win. They make the rules after all.

"Lawyers to strike from Monday through Wednesday"
This says a lot about Greece and how messed up the country is.

Yeah, retrofitting CACs will have no unintended consequences on other bonds. Sheesh!

"All three exchanges are involuntary in the sense that creditors that dissent or hold out are not repaid in full."

How would credit default swaps be affected by this? That still sounds like default to me.


Surely this is a default, which is the thing they are trying to avoid (triggering default swaps).

Good Lord. As if any of this still mattered!

Here's all a Greek policymaker needs to know:

All is lost.

The awful truth is that long term the EU can get on fine without Greece, and EU politicians appear to be coming around to the idea that having a "cradle of Western and European civilization" in the EU made good PR for a while but in the end admitting a post-Ottoman basket case made no more sense in Greece's case than it would have in the cases of such cradles of civilization as Egypt or Iraq. Keeping the lights on at French banks stuck with defaulted or repudiated Greek debt is what the ECB is for. As for cradles of Western civilization, they still have the seat of the Roman Empire---and the British Empire, for that matter.

So nobody in a position to do much about it has much reason to care. They do care about angry, poorly-educated, lower-middle-class men in their home countries for whom seeing divine justice violently served far away is less likely to get them into trouble than punching their wives for overcooking dinner, or beating their children for answering back, or kicking the dog for crapping on the carpet. They're the ones who vote for Europe's politicians, not the Greeks who are going to be slaughtered in a civil war.

And civil war is what we are looking at. After March 20 the Greek government will be unable to finance its operations at any price. Within weeks, possibly days, Greece will become ungovernable by anything resembling a democratic or liberal government as unpaid police begin to walk away en masse or carry out their threat to mutiny, shortly followed if not led by the army. Forget about seeing another cent from the EU. The Germans won't have it. Greece is being cast into the flames so Angela Merkel can give Bild readers what they think they want---photos of bolshies, benefits spongers and bank managers getting what your typical poorly-educated, resentful, reactionary Bild reader thinks bolshies, benefits spongers and bank managers truly deserve, in any of a number of satisfyingly gruesome and sadistic ways.

If Merkel's feeling generous after her re-election, or Junta 2.0 do something really idiotic like invading Macedonia, Cyprus, or Turkey, the EU might send a few peacekeepers, eventually. For now you're on your own. The Hellenic Republic is lost. The first priority of whatever replaces it will be doing away with you. If life you value, get out now!

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