Dead, deader — and eventually, stuffed inside the ECB/Greek banks.
Chart courtesy of Citigroup’s European banks analysts (click to enlarge):
Never mind bailout payment delays, that’s a real looming headache for Greek default risk in the future. According to Citi:
We believe a restructuring event is likely if Greece’s debt-to-GDP ratio from 2015 onwards continues to climb. In that case, investors and interested parties who would be left holding debt (not loans) would be the IMF, Euro Area governments, ECB, Greek banks, foreign banks (less so) and non-banks (less so)… Given the pace of delevering of Greek risk by foreign and domestic non-banks, under a conservative scenario, Greek banks’ holdings of Greek sovereign debt could almost double by 2015.
However — Citi make the interesting point that the pain of a 2015 default might be mitigated for bondholders by the fact that many would’ve bought their bonds at market prices below (say) a 10 per cent haircut.
Plus, we’d note that Greek banks’ government debt holdings are almost entirely on their held-to-maturity books, rather than available-for-sale, saving them from being marked to current market prices. Good job, too.
This other Citi chart shows the damage that would be done if they were marked (click to enlarge):
One last point (riffing off a recent BarCap note): the more concentrated holdings of Greek government debt become… the easier negotiations on restructuring would be.
Related links:
From the annals of brave banking calls – FT Alphaville
It’s all Greek (banks) to the ECB – FT Alphaville