Thursday, October 27, 2011

My Big Fat Greek Haircut

(Via the Drudge Report)

Reuters is reporting that there is an agreement for the private holders of Greek bonds to take a 50% "haircut". In normal language, that means they are going to write down the value of their bond holdings by half.

Now, I'm not a financial maven, nor do I play one on TV, so take my thoughts with a grain of salt.

I'm assuming that, since the bondholders have agreed to this, it means one of two things--either they're hoping that this reduction means that they will actually get half of what they are owed, or that they were pushed into this deal to avoid something worse, such as an outright Greek default on the bonds, which would mean they get nothing.

Either way, if the EU can and will enforce reforms on the Greek state that keep them from simply borrowing more money, this might put this one little part of the great EU Debt Debacle to rest, at least for a while. However, I'm now expecting a parade of other states, such as Ireland, Portugal, Spain and Italy (for starters) to line up for an equivalent deal, which could keep the ball rolling forward, perhaps at an accelerated rate.

Because you have to wonder how many of those holders of Greek bonds own some of those from the other weak EU states as well, now don't you?

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