Greek-out culminates in talk of eurozone exit [updated]
All those Greek-out! leaks — recent reports suggesting the Hellenic Republic was gearing up towards a debt restructuring — seem to have reached a final, dizzying (and totally unconfirmed) pinnacle.
But first, courtesy of RBS’s chief European economist Jacques Cailloux, reminder of what’s already happened in recent Greek debt/eurozone crisis news:
On April 2nd, German news agency DPA reported that Der Spiegel wrote in an article to be published on the Monday (“IMF pressuring Greece to restructure”) that IMF officials had “pushed privately the country to swiftly restructure its debt”. More specifically, “among the options that the IMF suggested are that holders of Greek debt could take a so-called haircut, maturities could be extended or interest rates on Greek sovereign debt could be reduced”. It added, “high-level representatives from the IMF pushed for a restructuring during recent discussions with delegates from European governments”.
On April 10th, Der Spiegel referred to a conference call that took place on April 2nd between European finance ministers, the ECB, the Commission and the IMF where the debt crisis was discussed. In that conference call, Schauble “and some of his colleagues” would have “expressed their unease about developments in Greece and voiced scepticism about whether the reform measures would ultimately succeed”. The magazine went on saying that “some finance ministers very gingerly suggested that, given the situation, it might make more sense to let Greece restructure its debt”. To which Pdt Trichet would have replied “I am not prepared to talk about that”. The magazine also stated that “Rehn told his colleagues that they should not speak publicly about Greek debt restructuring, but that a restructuring would have to be carried out in good time”.
Then came Schauble’s interview in Die Welt on April 14th where he was quoted as saying “until [June 2013] however, debt restructuring would only be possible on a voluntary basis”. The quote was ambiguous as he also said in that interview that if the IMF/EC quarterly review raised doubts about Greece’s debt sustainability, “then, further measures will have to be taken”. While the two quotes might not necessarily imply that a restructuring was an option considered if the debt sustainability analysis would become even more challenging, it is easy to see how markets drew that conclusion. In any case, the voluntary restructuring option was now officially mentioned as a possibility. Schauble later dismissed as misguided interpretations comments suggesting he had implied that a restructuring was the only option left.
On April 15th, the FT suggested that Germany was “drawing plans to restructure Greece’s sovereign debt” should Greece fail to deliver on its reforms (See FT article “Germans plan for Greek debt shake-up”). The options discussed in Germany included, according to the FT, a Greek debt swap for instruments similar to “Brady bonds”, a European vehicle buying Greek debt maturity extensions.
On April 17th, the Wall Street Journal (“IMF believes Greece should consider debt restructuring by 2012”), reported on a number of additional background information it claimed came from IMF senior officials. Importantly, it reported a very similar quote to that of the April 10th Spiegel article, apparently from other sources: “A second official familiar with the situation said a number of senior euro-zone officials, including finance ministers, have told the ECB that they believe a restructuring will be necessary”. Also according to the FT article, “the scenario to be examined first will involve extending debt repayments by as much as 30 years […] but with the same coupon. Another scenario could involve reducing Greece’s coupon payments and extending maturity dates.”On the same day, the Greek press also suggested that a restructuring was being discussed: Kathimerini in an article posted late on the Sunday (“Restructuring speculation dogs Greece”) said that “ […] during a recent visit by officials from the EC, ECB and the IMF to Athens, Papaconstantinou raised the issue of extending maturities on all of Greece’s debts of about Eur340bn”. On Monday 18th, the Greek paper Eleftherotypia reported that Papaconstantinou brought a request to extend the maturities of all the country’s debt at the Ecofin meeting on April 8-9.
And now … well … brace yourselves.
Der Spiegel (somewhat apropros given the German newspaper was the first to most recently kick-off those restructuring talks) is reporting that Athens is “considering withdrawing from the eurozone.”
An extract from the English-language article below:
Greece’s economic problems are massive, with protests against the government being held almost daily. Now Prime Minister George Papandreou apparently feels he has no other option: SPIEGEL ONLINE has obtained information from German government sources knowledgeable of the situation in Athens indicating that Papandreou’s government is considering abandoning the euro and reintroducing its own currency. Alarmed by the attempt, the European Commission has called together a crisis meeting in Luxembourg on Friday night. In addition to Greece’s possible exit from the currency union, a speedy restructuring of the country’s debt also features on the agenda.
The euro is down around 1.4488 against the dollar at pixel time.
Why do these things always seem to happen on the weekend?
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