A Greek Moment That Will Last Forever

“We propose a rationalisation of Greece’s debt repayment schedule along the following lines. First, to effect an SMP Buy-Back, Greece acquires a new loan from the ESM, then purchases the SMP bonds back from the ECB and retires them.” Greek Finance Minister, Yanis Varoufakis, June 18 2015

Few bankers like to take a haircut on a bad loan, but most will in otherwise hopeless circumstances. No banker, however, will lend to the debtor to facilitate repurchasing their debt at a discount

To be honest, the Greek Finance Minister has a good idea. With Greek Debt trading at 50c on the Euro, why not just buy it back cheaply and retire it? He should be doing this every day that he can, in fact. One Euro spent buying back two Euros worth of debt is money much better spent than on pensions or trips to Brussels

But to ask your creditors to lend you the money to buy back the debt??? Precocious? Maybe. Amateur? Definitely

What we are witnessing in the negotiations between the EU/ECB/IMF and Greece has nothing to do with finance. It is all politics. And while the markets want a definitive solution as soon as possible, the politicians on all sides are basking in the attention. This is the politicians’ moment of international significance, a moment that they all want to last forever