Germany and France say they have an agreement on key principles of a new financing package for Greece. Among them: The country’s private-sector creditors will help provide some of that financing, but only if they want to.
Most importantly, Germany has agreed that Greece will not be allowed to default, satisfying the European Central Bank’s key condition for supporting a new aid package.
Here’s the problem: It’s hard to see how all this fits together, unless Germany has given up its demand for significant private-sector involvement.
The more gentle plans for private-sector contribution involve Greece’s creditors agreeing to buy new Greek bonds once their old bonds mature. But the new bonds would surely have coupons well-below the current stratospheric market yields for long-term Greek debt.
The ratings agencies have all said this is almost certain to be considered a default.
By Matthew Dalton
WSJ
