Greek Bailout…Again

Image:Frankfurt, European Central Bank with Euro.

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Yet another final, bailout to end all bailouts was agreed to yesterday, with the goal of calming investors and assuring the world that the Eurozone and the Euro is fine.  As Kevin Bacon put it in Animal House, “Remain calm, all is well!”

Unless of course you are a private investor in Greek bonds.  The bailout deal has them taking a shave of up to 70% of the value of their bonds.  Of course, it’s not like any investor should be surprised that their $100 of Greek Debt could now be worth $30.  It’s a free market baby, you puts down your money and you takes your chances.  Except in this case there were no chances being taken by the European Central Bank.  They kept the value of their bonds.  The private investors were sacrificed on the altar of European banks and government backed loans.  Those loans remain whole.

Meanwhile, back in Greece, austerity continues apace, with unemployment running over 20%.  Those are unemployment numbers usually associated with a depression. And Greek workers are not being paid this month and some workers will be asked to actually return salaries already paid.  Take that ECB!

Basically what happened wasn’t a bailout, it was a bankruptcy.  A bankruptcy on the down low to be sure, and it still probably won’t be the last one, but a bailout plan that negotiates knocking off the value of some of the debt by up to 70% (of people who didn’t have a seat at the table) is really a country wide chapter 11.  But everyone is going to pretend that it was just bailout.

The only question now is when will Chancellor Merkel fire the Greek cabinet and replace them with her own people.

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One thought on “Greek Bailout…Again

  1. Called it!

    Moody’s declared Greece in default on its debt Friday after Athens carved out a deal with private creditors for a bond exchange that will write off 107 billion euros ($140 billion) of its debt.
    Moody’s pointed out that even as 85.8 percent of the holders of Greek-law bonds had signed onto the deal, the exercise of collective action clauses that Athens is applying to its bonds will force the remaining bondholders to participate.


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