Categories Uncategorized More on Restructuring Post author By Philip Lane Post date May 4, 2011 3 Comments on More on Restructuring This WSJ article lays out the issues regarding Greece, while this article puts the case for moving quickly. Related ← Constructing a National House Price Index for Ireland → Video from EUI Conference on Sovereign Default 3 replies on “More on Restructuring” For those interested in this issue, this short paper by Buchheit and Gulati covers a lot of ground. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1807011 @ Karl “Secretary, Nicholas Brady, announced (on March 10, 1989) a shift in U.S. Government policy toward the management of the global debt crisis. Secretary Brady encouraged the banks to write off a portion of their exposure to the debtor countries, and to stretch out repayment of the balance for 30 years, as a means of ending the global debt crisis in a single stroke. And, more or less, the Brady Initiative did just that. Banks swallowed (modest) losses on their sovereign portfolios; debtor countries regained (modest) market access; the banks’ loan loss reserve provisions (built up over the prior seven years) cushioned the balance sheet effect of the losses. A banking crisis in the developed countries did not follow the launch of the Brady Initiative. Yep, crisis management in the eurozone has been a disaster. Speed is of the essence as it is in dealing with a house on fire. Our bailout has left our economy smouldering and eating away at its health. It has been a disaster to take bondholder debt onto public shoulders. A large portion of the blame for the mismanagement of this debt and responsibility for continuing crisis must be laid at the foot of the ECB. I agree with those authors, we need a Brady bond type approach with say 50% writedown and repayment extensions. In the case of Ireland, our problems should have been easier to solve if we separated banking debt from sovereign debt. I’m not able to calculate the amount of damage already done to our fragile economy by paying the huge amounts over to bondholders to benefit the commercial interest rates of private lenders at 12% coupons? OR to what extent these payments now impact on our ability to pay sovereign debt and ‘bailout’ and meet bondholder repayments and therefore whether the concept of Brady bonds can help much in Ireland’s case. We are already getting liquidity support at close to zero. Its possible our leaders and the ECB wish to make us a permanent ward of Europe instead of restoring our ‘sovereign’ economy. But debt restructuring of our sovereign debt is now on the cards, whereas before now the fire could have been contained to private banking debt if dealt with properly in the first place. Brady concept as has been argued elsewhere is much overdue as a device to prevent the gorse fires going out of control:) Ireland needs a similar restructuring proposal but our political leaders seem happy to go along with roast pig for lunch bailout mana , at least until 2013! @PL ‘Alessandro Leipold, a former acting chief of the International Monetary Fund’s [IMF] European Department, in a paper published Tuesday by the Lisbon Council, a Brussels think tank […] argues, the EU’s no-default-before-July-2013 policy is “a political and procedural artifact, divorced from economics and heedless of market developments.” There is compelling logic to the argument that, if it’s necessary to restructure Greek debt, it’s better to move decisively and rapidly.’ Ditto on Irish Debt. Time, again and again and again and again, is key variable & Irish are dozing since 2007 while its kitty is being pilfered and an entire generation is being sacrificed : WAKE UP! Comments are closed.