It's all right, then. The about-to-retire head of the European Central Bank and someone at the headless International Monetary Fund are discussing "financial modalities" which may or may not include "reprofiling" of Greek debt, "voluntary exchange" and other "involvement" of private-sector creditors, but must not include a "credit event", but must include a Greek agreement to a "reinvigoration" of reforms which include "rationalization in entitlements."
Translation: Greece is again promising to do what it has already promised but failed to do, while the euro zone's deep pockets plan a takeover of Greek finances, and struggle to find language that will impose losses on private-sector creditors without provoking the rating agencies into declaring default, or the ECB into cutting off the flow of liquidity to Greek banks. More euros to pour into bailouts, a bucket with a hole in it.
The daily soap opera being performed by the stars of Euroland drama is gripping fare. The Greek government and its trade unions; the European Central Bank; the International Monetary fund; various euro-zone institutions; German chancellor Angela Merkel; and assorted bit players strut and fret across our television screens and financial pages, in the end signifying very little. Waiting in the wings are Italy, Spain, Belgium, perhaps even the U.K., if the current downturn proves to be the beginning of a tragic Grecian debt spiral.
But one way or another these immediate crises will be resolved. ECB boss Jean-Claude Trichet will in the end be reluctant to bring down Greece's banks. Ms. Merkel knows that if the troubled countries are allowed to meet the fate written on their ledgers, the under-capitalized German banking sector might go down with them. And the eurocracy prefers buying time in the Micawberish hope that something will turn up to keep Euroland from fracturing, rather than face reality.
by Irwin Stelzer
WSJ
6 June
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http://online.wsj.com/article/SB10001424052702304474804576367352565764590.html
