The summit communique contains the following:
’12. The Private Sector Involvement (PSI) has a vital role in establishing the sustainability of the
Greek debt. Therefore we welcome the current discussion between Greece and its private
investors to find a solution for a deeper PSI. Together with an ambitious reform programme
for the Greek economy, the PSI should secure the decline of the Greek debt to GDP ratio with
an objective of reaching 120% by 2020. To this end we invite Greece, private investors and
all parties concerned to develop a voluntary bond exchange with a nominal discount of 50%
on notional Greek debt held by private investors. The Euro zone Member States would
contribute to the PSI package up to 30 bn euro. On that basis, the official sector stands ready
to provide additional programme financing of up to 100 bn euro until 2014, including the
required recapitalisation of Greek banks. The new programme should be agreed by the end of
2011 and the exchange of bonds should be implemented at the beginning of 2012. We call on
the IMF to continue to contribute to the financing of the new Greek programme.’
I don’t quite see the point of going through a default (which is not, of course, a credit event) in order to get Greece down to 120% of GDP in 2020.
But note the very nifty €30 bill to be contributed by ‘…the Eurozone member states…’.
This could include little us! Imagine, the team taking one for France and we are allowed to tog out!
What is being proposed here is that European investors who lost money in Greece are getting bailed out to the tune of €30 bill, not by their host governments but by the team. Those who lost money in Ireland got bailed out, and continue to get bailed out, by the host government only.
You have to hand it to the French.