Complicated, ambiguous, a Heath Robinson machine of sovereign debt payment.
Those are all good ways to describe the likely legal strategies that are now open to Argentina, if it proposes to go on freezing out holdouts but continue paying out on restructured foreign-law debt. That’s after last Friday’s landmark US Court of Appeals decision. Read more
We are NOT making this up. We couldn’t.
Hard to believe it was six months ago.
If you think the fat lady hasn’t yet belted it out on the possibility of future sovereign debt restructuring in the eurozone… (and who’d rule it out, ECB actions notwithstanding) Read more
Amazing what sometimes comes out of the European Parliament.
That’s an amendment from Jean-Paul Gauzès, Member of European Parliament, to the otherwise fairly sober draft legislation on how EU bodies should monitor governments’ finances, including bailout programmes. Dubbed the “two pack”, the draft legislation (including the Gauzès amendment) was approved by MEPs on Wednesday. This won’t come into force until the European Council has reviewed the legislation, which is going to mean months of negotiation, rejection of parts of the measures, and amendments, probably. Read more
As we all wait for an actual Spanish bailout loan doc, and what it might say about that ESM seniority…
Here’s some seriously intriguing, counter-intuitive food for thought from Barclays’ Piero Ghezzi. From a Tuesday note: Read more
Holding foreign-law bonds in preference to domestic-law in peripheral eurozone sovereigns: such a cliché now, they built the Greek PSI around it.
It also made it possible (though it alone did not make it probable) for holdouts in the €435m May 2012 floating-rate note to get paid out in full on Wednesday. Read more
EFSF will make €5.2bn payment to Greece – Reuters
Although €4.2bn will be disbursed on 10 May and the rest has been held back because Greece doesn’t need it until June, apparently. Anyway, on that note… Read more
*Tsipras says must be moratorium on Greece debt payments
That, earlier on Tuesday, was Alexis Tsipras – head of Syriza and current owner of the mandate to form a coalition government (as forlorn as that is now looking). Syriza took second place in Sunday’s elections. Read more
Subordination of private bondholders by the official sector is already very acute. This means that the more a PSI exercise is delayed, the higher the haircut on the notional needs to be for a given level of debt relief. Consequently, the sooner a PSI exercise happens, the better…
Not Greece 2011, but Portugal 2012. Read more
Update – Aargh maybe we do have to stay up. Reuters has a Greek official bandying round a nearly 95 per cent participation rate figure. Also see the FT’s update below.
Looks like FT Alphaville New York won’t have to stay up until the wee hours of Friday morning after all — from the FT: Read more
Latest from the Greek finance ministry (its debt manager has met German banks):
The Republic confirmed that if it receives sufficient consents to the proposed amendments of the Greek law governed bonds identified in the invitations for the amendments to become effective, it intends, in consultation with its official sector creditors, to declare the proposed amendments effective and binding on all holders of these bonds. Consequently, all obligations of the Republic to pay holders of those bonds any amount on account of principal will be amended to permit the Republic to discharge these obligations in full by delivering to the holders of the amended bonds on the settlement date the consideration described in the invitations. In addition, the Republic’s obligation to pay interest on its Greek law governed bonds will be amended so as to reduce the amounts due to interest accrued through 24 February 2012 and to provide that such amounts will be paid by delivering short-term EFSF notes in lieu of cash. No further interest will accrue or be payable on those bonds. Read more
A reader passes on this curious detail from a Finnish MPs’ debate on Greece (via Helsingin Sanomat):
Some MPs expressed shock that the Ministry of Finance decided to keep the collateral agreement reached between Finland and Greece a secret. Read more
Let’s start by saying you’re a bondholder mulling Greece’s PSI offer this weekend. (Or you’re Maynard, after a hellish week, reflecting on the offer that you helped to create.)
Remind yourself… Read more
Click image for the full release doc — we’re still waiting for the technical memo stuff: Read more
With a long night of Euro-deal watching ahead we thought we would leave you some mixed-metaphors to mull over.
This is from Gabriel Sterne over at Exotix (emphasis his): Read more
First, do read Dan Davies’ bailout options post if you haven’t already. It’s like a Greek Kobayashi Maru. Except you have no hope of ending up like James T Kirk. We got to number 5.
But speaking of Greek debt situations where there are no good outcomes left… Read more
The central administration lacks the management, oversight and co-ordination structures to support effective implementation and long-term management of policy measures, including structural reforms to support sustained economic growth. This is a fundamental obstacle upon which many reforms have already stumbled…
Legal formalism has generated a culture and legal framework which provides no incentives for initiative on the part of civil servants, discourages any policy actions which are not accompanied by a legal text, privileges the observance (and development) of administrative processes rather than attention to the policy substance of civil service work, and slows down the work of the administration… Read more
Goodbye to one massive FT Alphaville bugbear, anyway? An interesting story from Stephen Fidler of the WSJ/DJ FX Trader:
The ECB has agreed to exchange the government bonds it purchased in the secondary market last year at a price below face value, provided the debt-restructuring talks have a successful outcome… Read more
- Parachuted in by the great powers of the time Read more
Eurozone states signed the final version of the treaty establishing the European Stabilisation Mechanism on February 2.
(Click the image for the full document) Read more
The FT’s James Mackintosh recently pointed out an interesting provision in the loan agreement Greece has with its bilateral official creditors – its fellow eurozone states.
They are entitled to require Greece to pay the whole loan back immediately if the country defaults on private bondholders. Click the image to enlarge (the full agreement is available here from the Greek finance ministry): Read more
The unstoppable force…
“If the level of Greece’s privately held debt is not sufficiently renegotiated, then public creditors, holders of Greek debt, will also have to participate in the financial effort,” Lagarde told journalists in Paris. Read more
If you didn’t believe us that the European Central Bank will do everything it can to achieve seniority for its Greek bonds in the country’s debt restructuring, hopefully Thursday’s ECB press conference convinced you.
Not only did ECB chief Mario Draghi obsfuscate — twice — on whether the bank is prepared to take losses on its Greek debt, but Vitor Constancio, the vice-chief, made a point of emphasising that Greece is negotiating private sector involvement. Read more
There was a nice line in the FT’s latest story on Greece’s debt restructuring:
Questions are also being raised about the ECB’s estimated €45bn of Greek sovereign holdings. Collective action clauses are likely to be introduced into Greek bonds by the PSI deal, leaving the ECB – which has said it will not participate in the voluntary restructuring – potentially in an uncomfortable position in the future. “The ECB’s holding will be the story to watch in the next few months,” a person close to bondholders said. Read more
Chart of the week — from Gabriel Sterne of Exotix:
We think the IMF just might be trying to say something to those who are still looking for a “voluntary” Greek bond write-down.
Interesting set of quotes dotted around the Fifth Review: Read more
FT Alphaville is still confused by eurozone bigwigs’ promise that they’ll follow “IMF principles” to be friendly to bondholders in sovereign debt bailouts. Versus, say, being nasty about making them write down debt.
The promise got the IMF wrong. It also ignored what’s still going on in Greece’s “involvement” of the private sector. Which isn’t very friendly at the moment. More like “catastrophic”. Read more
As regards private-sector involvement, we have made a major change in our doctrine: from now on we will strictly adhere to the IMF principles and doctrines… Or, to put it more bluntly, our first approach to PSI, which had a very negative effect on debt markets is now officially over.
That would be Herman Van Rompuy, talking gibberish about debt restructuring to journalists (via Bloomberg) way back at Thursday evening’s Eurofudge summit. This is prime Eurofudge, and just as important relative to what the summit did about structural deficits, automatic consequences for deficit failures, and so on. Read more