It’s being discussed in the comments already but it’s worth giving German Finance Minister Wolfgang Schauble’s letter to the ECB, IMF and Ecofin ministers its own thread. The key proposal:
This means that any agreement on 20 June has to include a clear mandate — given to Greece possibly together with the IMF — to initiate the process of involving holders of Greek bonds. this process has to lead to a quantified and substantial contribution of bondholders to the support effort, beyond a pure Vienna initiative approach. Such a result can best be reached through a bond swap leading to a prolongation of the outstanding Greek sovereign bonds by seven years, at the same time giving Greece the necessary time to fully implement the necessary reforms and regain market confidence.
Just to be parochial about this for a minute, this raises an interesting question. If this approach was implemented successfully and did not trigger a financial crisis (I know some disagree — this is a hypothetical question) what are the chances that a similar restructuring would not be part of any potential second EU-IMF deal for Ireland?
Given that Irish politicians and media have decided that Leo Varadkar’s comments about Ireland probably having to get a second EU-IMF deal is some kind of faux pas, it is perhaps worth pointing out that this opinion is widely shared by pretty much everyone I have to talked to in recent months.
Anyway, given that this issue is being discussed, now might be a good time to put up a link to this talk that I gave at the IIEA a few weeks ago. I discuss the risks relating to the current EU-IMF plan the likelihood of the need for a new deal. The slides for the talk are also on the page.
Here‘s an article I wrote for Business and Finance on the question of whether Ireland’s fiscal debt is sustainable.
One correction I’d add to the article is that I miscalculated the average interest rate on existing Irish debt and reported it in the article as about 3 percent. The correct figure, as calculated by the EU Commission, is 4.6%.
As promised a few weeks ago, here is a link to the video of EUI’s workshop “Life in the Eurozone With or Without Sovereign Default?” held a few weeks ago. All of the presentations were interesting but I’d particularly recommend Martin Hellwig’s presentation in part 2 and sovereign debt lawyers Mitu Gulati and Lee Buchheit’s presentations in part 3. Unfortunately, there doesn’t seem to be video of Charles Calomiris’s thought-provoking presentation but his slides (and the other presentations) can be found by clicking on the links here.