Paying Greece’s Creditors: History Teaches Us Only So Much
Now that the ECB has—for the time being—effectively vetoed any bail-in of Greece’s creditors—even a modest reprofiling of the debt, which would push maturities out at unchanged coupon while keeping face value at par—the official sector is running out of options for a meaningful bail-in of creditors. The latest idea—apparently deemed acceptable even by the ECB—is a “voluntary” maintenance of the exposure of Greece’s bank creditors by inducing them to hold their exposure to the sovereign once their bond claims mature by rolling over their maturing bonds into new bonds. This option has been compared to the Vienna Initiative, which induced the cross-border exposure of foreign banks to the CEE banking system during the 2008-09 global crisis, when a number of sovereigns and banking systems in that region were at risk of rolling off the claims of foreign creditors.
However, the idea of bailing-in cross-border exposure to the banking system of a country under financial pressure has a longer history and includes similar bail-ins of foreign banks’ cross-border exposures to local banks in 1998 in South Korea, in 1999-2000 in Brazil and in 2001-02 in Turkey. The more successful experiences were the more coercive ones or when it was in the banks’ interest to maintain their exposures to their foreign affiliates.
Can the Vienna Initiative or Other Bank Creditor Bail-Ins Be Applied to Greece? No!
The application of the Vienna Initiative—or its variants in Korea, Brazil and Turkey—would not work in Greece for a number of reasons.
First, the cross-border exposure of foreign bank creditors to Greek banks has already rolled off, forcing Greek banks to rely on ECB bailouts; so there is no exposure left to bail-in.
Second, while an orderly restructuring of the bonds held by the creditors of a sovereign can be achieved with little disruption or contagion via a debt exchange, a voluntary rollover only of banks’ bonded claims against a sovereign is much more complicated, and leaves open the option of bank creditors getting rid of their exposures to traded securities before maturity. (see RGE analysis: “A How-To Manual for Plan B: Options for Restructuring Greek Public Debt”).
Third, a purely voluntary maintenance of exposure at market rates would make the sovereign’s debt even more unsustainable and, in time, ensure a default on the new bonds.
Fourth, the only way to prevent the coupon/yield on the new bonds from being close to market rates and thus unsustainable would be to provide the new bonds with seniority or some collateral, but both options are undesirable as a rollover is not a case of DIP (debtor-in-possession) financing and thus doesn’t justify such credit sweeteners.
Fifth, banks alone would be bailed in—inducing massive inequality among creditors—and only maturing bonds would be sequentially rolled over as they mature, rather than a significant part of the debt being subject to a uniform debt exchange at a single point in time (with only the latter providing meaningful debt relief for the debtor).
Sixth, there would be little debt relief and consequently the unsustainability of the debt burden of the sovereign would remain unresolved. (see “Much Ado About Relatively Little: Contagion Risks From an Orderly Greek Debt Restructuring Are Modest, Contained and Manageable”)
An application of the Vienna Initiative to the issue of Greek public debt is totally far-fetched and unrealistic. An orderly and market-oriented debt exchange is feasible, but a purely “voluntary” rollover of the exposure of banks only to maturing bonds at market yields is extremely cumbersome and makes the debt burden for the sovereign even more unsustainable. And if the rollover occurs at unchanged coupon (original yield at issuance), there is little difference between such a rollover and a more traditional and efficient debt exchange with a par bond and maintenance of the original coupon. Thus, trying to apply something that was originally designed to bail-in cross-border short-term interbank lines among banks to the bonded debt of a sovereign is a big fudge: If it is done properly, it is no different from the sort of clean debt exchange that the ECB and others abhor; and if it is done on a “voluntary” basis, it creates an even bigger and more unsustainable debt monster for the sovereign and ensures—as in the case of Argentina, which attempted a voluntary mega debt exchange at unsustainable market yields—that a disorderly default will occur in 2012 or 2013. Thus, claiming that one can apply a voluntary Vienna Initiative to the case of Greece is just a continuation of the big fudge and delusional kicking of the can down the road that the ECB and the official sector has indulged in for over a year now in Greece.
Nothing short of an orderly and market-oriented but coercive debt exchange with a par and/or discount bond is feasible and desirable to provide debt relief to the sovereign while limiting the losses of the financial system in the debtor and creditor countries. The discussion of a Vienna Initiative for Greece shows the confusion of the official sector and of some market analysts when they talk of the likelihood of massive contagion and financial Armageddon in the event of an orderly restructuring, while also claiming to support “voluntary” approaches. The latter are highly contrived and counterproductive if not outright destructive of the debt sustainability that everyone is trying to restore in distressed sovereigns.
94 Responses to “Paying Greece’s Creditors: History Teaches Us Only So Much”
prolonged chart you admit
First of all, allow my family recognize a person’s command during this matter. Even though this is certainly brand new , nevertheless soon after registering your site, this intellect has exploded extensively. Allow all of us to take hold of one’s rss to help keep in touch with at all probable messages Sincere understand but will pass it on to help admirers and my private are living members
I love this blog site, will certainly arrive back. Make sure you continue producing good quality content articles.
Thanks for the interesting things you have unveiled in your writing. One thing I’d really like to discuss is that FSBO relationships are built as time passes. By launching yourself to the owners the first end of the week their FSBO will be announced, prior to the masses start calling on Monday, you create a good interconnection. By giving them resources, educational supplies, free records, and forms, you become a good ally. By taking a personal desire for them in addition to their scenario, you generate a solid interconnection that, oftentimes, pays off when the owners decide to go with a broker they know in addition to trust preferably you actually.
I admire the useful data you provide in your content. I will bookmark your weblog and have my kids check up here generally. I am fairly positive they will discover lots of new stuff here than anybody else!
Thanks for your content. One other thing is that if you are advertising your property on your own, one of the issues you need to be mindful of upfront is how to deal with home inspection records. As a FSBO home owner, the key to successfully shifting your property along with saving money upon real estate agent revenue is information. The more you realize, the more stable your property sales effort might be. One area in which this is particularly significant is assessments.
Thank you for every other informative website. Where else may I am getting that type of info written in such an ideal approach? I have a undertaking that I am simply now running on, and I’ve been on the look out for such information.
Thanks for taking the time to debate this, I really feel strongly about it and love studying more on this topic. If doable, as you acquire experience, would you mind updating your weblog with extra information? It is extremely helpful for me.
I don’t even know how I ended up here, but I thought this post was good. I don’t know who you are but certainly you are going to a famous blogger if you are not already 😉 Cheers!
Hi there, just became aware of your blog through Google, and found that it is truly informative. I’m gonna watch out for brussels. I’ll be grateful if you continue this in future. Many people will be benefited from your writing. Cheers!
Hey There. I discovered your blog using msn. That is a really neatly written article. I’ll be sure to bookmark it and return to learn extra of your helpful info. Thank you for the post. I’ll certainly return.
If you possess a Nintendo Wii gaming system, you perhaps are amazed featuring a capability to read your own movements and translate these folks into in – sport movements of characters in different Wii games.
Thanks for the new stuff you have exposed in your text. One thing I want to touch upon is that FSBO connections are built eventually. By introducing yourself to owners the first weekend their FSBO will be announced, prior to the masses start off calling on Wednesday, you create a good link. By mailing them tools, educational resources, free reports, and forms, you become a great ally. By taking a personal fascination with them as well as their situation, you make a solid interconnection that, in many cases, pays off when the owners opt with an agent they know and trust preferably you.
Thanks for your posting. One other thing is when you are advertising your property by yourself, one of the issues you need to be aware about upfront is how to deal with house inspection reviews. As a FSBO retailer, the key towards successfully moving your property plus saving money upon real estate agent income is expertise. The more you are aware of, the more stable your home sales effort might be. One area where this is particularly vital is information about home inspections.
What I wouldnt give to have a debate with you about this. You just say so many things that arrive from nowhere that Im quite positive Id have a fair shot. Your weblog is fantastic visually, I mean people wont be bored. But others who can see past the videos and the layout wont be so impressed together with your generic understanding of this topic.
Thank you for revealing these superb content. Moreover, the ideal traveling in addition to medical insurance program can often relieve people fears that are included with visiting in foreign countries. Your healthcare crisis may in the near future become costly along with that’s guaranteed to speedily impose an economic weight within the family budget. Having set up the best travel insurance bundle prior to setting off is obviously worth the persistence. Thanks a lot
I must say, as significantly as I enjoyed reading what you had to say, I couldnt help but lose interest after a while. Its as if you had a great grasp to the topic matter, but you forgot to include your readers. Perhaps you should think about this from extra than 1 angle. Or maybe you shouldnt generalise so much. Its better if you think about what others may have to say instead of just heading for a gut reaction to the subject. Think about adjusting your personal thought process and giving others who may read this the benefit of the doubt.
Have you ever thought about including a little bit more than just your articles? I mean, what you say is fundamental and everything. Nevertheless imagine if you added some great graphics or video clips to give your posts more, “pop”! Your content is excellent but with images and clips, this site could certainly be one of the greatest in its niche. Excellent blog!
Thanks thus largely forwards this series:)
What worst can happen with me plainly declare bankruptsy and refuse to repay personal loan (50K) plus reloacate to another land.
I found this internet site by performing a key phrase look for my area of interest. I am so glad I came across your website. You’ve got your self a loyal reader now. My Blog: http://www.youtube.com/watch?v=rjYsZs-YsFs
I adore examining and I conceive this website got some truly utilitarian stuff on it! .
Wonderful blog you have here but I was curious about if you knew of any community forums that cover the same topics discussed here? I’d really like to be a part of community where I can get responses from other knowledgeable people that share the same interest. If you have any recommendations, please let me know. Kudos!
I am impressed. I dont think Ive met anyone who knows as much about this subject as you do. Youre truly well informed and very intelligent. You wrote something that people could understand and made the subject intriguing for everyone. Really, great blog youve got here.
If everyone was like you the globe would be a much greater place to reside in. Terrific perception, maintain up the very good get the job done. My website: Chromagen Vision
I went over this web site and I believe you have a lot of wonderful information, saved to favorites (:.
Great post, you have pointed out some superb points, I too think this is a very superb website.
I must say, as substantially as I enjoyed reading what you had to say, I couldnt help but lose interest after a while. Its as if you had a great grasp to the topic matter, but you forgot to include your readers. Perhaps you should think about this from much more than one angle. Or maybe you shouldnt generalise so very much. Its better if you think about what others may have to say instead of just heading for a gut reaction to the subject. Think about adjusting your personal thought process and giving others who may read this the benefit of the doubt.
is probably one of the the. It tells me that you really don’t have a great deal on something
Hey – great blog, just looking about some blogs, appears a pretty great platform you’re making use of. I’m presently using WordPress for a couple of of my websites but looking to alter 1 of them above to a platform comparable to yours like a trial run. Anything in particular you’d suggest about it?
I like this site very much, Its a very nice billet to read and obtain information.
one more content. every day material and written I was doing, and wanted.
Silver is generally priced by current market value, other wise known as melt value. This is the value of any silver that is melted down and sold by weight in the open market at whatever the prevailing price happens to be. As of the time of this writing, the current price of silver is approaching /oz.
Sick! Just got a brand-new Pearl and I can now read your blog on my phone’s browser, it didn’t work on my previous one.
Just a fast hello and also to thank you for discussing your ideas on this web page. I wound up in your weblog right after researching physical fitness connected issues on Yahoo… guess I lost track of what I had been performing! Anyway I’ll be back once again inside the potential to examine out your blogposts down the road. Thanks!
Good to be browsing your blog once more, it has been months for me. Properly this write-up that i’ve been waited for so lengthy. I need this article to total my assignment inside the school, and it has exact same topic with your write-up. Thanks, good share.
some times its a pain in the ass to read what website owners wrote but this site is rattling user genial ! .
Very useful post right here. Thank you for sharing your knowledge with me. I’ll definitely be back.
very interesting points you have mentioned , regards for posting .
Thank you for the blog post. Manley and I are saving for our new e book on this theme and your writing has made us to save our money. Your opinions really solved all our problems. In fact, greater than what we had recognized before we ran into your fantastic blog. My partner and i no longer nurture doubts plus a troubled mind because you totally attended to each of our needs in this post. Thanks
alter gross income preserves abrade at which time her was petrification upstanding my website, all there in re the options on merchant marine were alarming.
I enjoy this website, will definitely come back. Please keep on producing top quality articles.
This was a actually extremely beneficial submit. In theory I’d wish to publish like this also – getting time and actual effort to make a terrific piece of writing… but what can I say… I procrastinate alot and by no means seem to obtain anything done.
Generally I don’t learn post on blogs, but I wish to say that this write-up very compelled me to try and do so! Your writing taste has been amazed me. Thanks, quite nice article.
I love your writing style truly enjoying this website .
Hey there! I know this is kinda off topic but I was wondering which blog platform are you using for this site? I’m getting tired of WordPress because I’ve had issues with hackers and I’m looking at alternatives for another platform. I would be fantastic if you could point me in the direction of a good platform.
What a lovely blog page. I’ll surely be back. Please hold writing!
My neighbor and I have been simply debating this specific topic, he’s often in search of to show me incorrect. Your view on this is nice and exactly how I actually feel. I just now emailed him this web page to indicate him your personal view. After wanting over your web site I e book marked and will probably be coming back to learn your new posts!
I enjoy you taking the time to write this post. It has long been very valuable to me indeed. Enjoy it.
this website is my inspiration , very excellent style and perfect content .
I have noticed that clever real estate agents everywhere are warming up to FSBO Marketing. They are knowing that it’s not only placing a sign post in the front area. It’s really about building relationships with these sellers who at some time will become purchasers. So, after you give your time and energy to encouraging these retailers go it alone — the “Law of Reciprocity” kicks in. Good blog post.
some truly grand work on behalf of the owner of this website , utterly outstanding content material .
i love what you are saying here…
Great post, you have pointed out some good details , I also conceive this s a very superb website.
Old hammered coins have become increasingly popular among collectors that appreciate the history and culture that’s engrained in their very essence.
A very fascinating study, I may possibly not concur totally, however you do make some very valid factors.
I am glad to be a visitor of this gross web blog ! , appreciate it for this rare info ! .
Youre so cool! I dont suppose Ive read something like this before. So good to search out somebody with some authentic ideas on this subject. realy thanks for starting this up. this web site is one thing that’s wanted on the net, someone with a little originality. helpful job for bringing one thing new to the internet!
Hey. Very cool web site!! Guy .. Beautiful .. Amazing .. I’ll bookmark this web site and take the feeds also…I am happy to find so much helpful information right here in the post. Thanks for sharing..
I surely didn’t know that. Learnt a thing new nowadays! Thanks for that.
Very useful post here. Thank you for sharing your wisdom with me. I’ll definitely be back again.
If you really know your stuff and therefore are experienced at making money away various websites, you’d probably be smart with the third option.
היי אני מעוניין להראות על אתר מאמרים חינמיים . פורטל המאמרים היחיד במדינה המאפשר לכותבי המאמרים באתר לרשום פרסומות גוגל אדסנס מהחשבון שלהם במאמרים שהם כותבים וכך אפשרי להרוויח דולרים בנוסף לקישורים.
I am glad to be one of several visitants on this outstanding website (:, regards for putting up.
I conceive this internet site holds very wonderful written subject material articles .
אני מוכרח לשתף אותכם שהזמנתי מטבח חדש ושאר הרהיטים לדירה שלי , הזמנתי ארונות אמבטיה , ארונות הזזה , מזנון .
I enjoy this website, will definitely come back. Please continue producing top quality content.
I adore your writing design, do carry on writing! I will be back!
The Canadian Maple Leaf Gold Coin is a fantastic investment today. Minted because of the Royal Canadian Mint, it truly is the official gold coin connected with Canada.
I am glad that I detected this web site, exactly the right information that I was looking for! .
Superb blog! Do you have any helpful hints for aspiring writers? I’m hoping to start my own site soon but I’m a little lost on everything. Would you suggest starting with a free platform like WordPress or go for a paid option? There are so many choices out there that I’m completely confused .. Any recommendations? Bless you!
Normally I don’t read article on blogs, but I would like to say that this write-up very forced me to check out and do it! Your writing style has been amazed me. Thank you, very great article.
some truly prize posts on this web site , saved to my bookmarks .
This is a good putting up, I was thinking if I would use this write-up upon my web site, I will website link it back to your website although. If this is a challenge please make me aware and I will take it down right away
Just wanna comment that you have a very nice website , I love the pattern it actually stands out.
encomium up to benevolence moving fabrication previous entrepreneur nonsensical extension – arcane by reason of the ivie & lauren!! this is great! certain mass pluralism.
An incredibly fascinating go through, I may not agree totally, however you do make some very legitimate factors.
It is appropriate time to make some plans for the future and it is time to be happy. I have read this post and if I could I wish to suggest you few interesting things or advice. Maybe you could write next articles referring to this article. I desire to read even more things about it!
A domain name is an identification label which defines a realm of administrative autonomy, authority, or control in the Internet. Domain names are also important for domain hosting\website hosting
I surely did not realize that. Learnt something new these days! Thanks for that.
I am able to thoroughly realize anything you mean by that. I simply just wish much more individuals might have an open mind about it as a substitute of their outdated attitudes.
Just wanna input on few general things, The website design is perfect, the subject material is rattling excellent : D.
I really appreciate this post. I’ve been looking all over for this! Thank God I found it on Google. You have made my day! Thanks again..
Sick! Just obtained a brand-new Pearl and I can now read your blog on my phone’s browser, it didn’t get the job done on my outdated 1.
Thanks for spending some time to talk about this specific, I feel firmly about it and adore determining more on this subject. If at all, as you achieve expertise, does one thoughts updating your blog with additional information? It’s very useful for myself.
With the event which looks like it’s building in the course of this material, all your points of view happen to be seriously exciting. With that in mind, I plead your excuse, but I can’t give support to your overall suggestion, all be it stirring none your less. Surely that your findings are generally not entirely validated along with reality that you are your self definitely not completely self-confident of the level. In any case I did so delight in evaluating it.
היי הידעתם? ריהוט משרדי הינו כולל ארונות משרדיים, כונניות, שולחנות משרדיים, שולחנות מנהלים, דלפקי קבלה, תיקיות, רהיטים משרדי ממתכת, כורסאות מנהלים, כסאות משרדיים, כסאות אורחים והמתנה, וילונות ונציאני ורטיקאלי ועוד מחיצות אקוסטיות .
this web site is my aspiration , rattling good layout and perfect content material .
Depending on what like blog that you’ve, it could be a good idea to market your blog utilizing content.
some truly great posts on this website , regards for contribution.
I am so happy to read this. This is the type of info that needs to be given and not the random misinformation that is at the other blogs. Appreciate your sharing this best doc.
It was a great read for me. any can also can read my article here http://www.flightsimulationgamesreviews.com/