BBC: Was the "buying time" approach a "roaring success" in Greece?

[DCBob]

Article written by Stephanie Flanders, BBC Economics editor
Greece: where are we now?
9 March 2012

-snip-

..as sovereign defaults go, this is about as orderly as they come. But partly thanks to all this support from its neighbours and the IMF, the Greek government will still come out of the process with too much debt.

-snip-

Yet, even the news that collective action clauses will be used to strong-arm some bondholders, for the first time in a developed economy, has barely caused a ripple in the financial markets.

Investors are disappointed, maybe. But not surprised. The ground had been carefully laid and the damage - so far, at least - has been contained.

All of which makes it sound like a roaring success for the "buying time" approach. Except, they have gone to all this effort for a "default" which does not really do what Greece needed it to do.

http://www.bbc.co.uk/news/business-17312854

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My comments: This article is a few days old buts its still very relevant. I think the "buying time" approach was exactly was needed to be done. If Greece was allowed to collapse a couple of years ago it likely would have triggered a regional econonic crisis which then would have triggered a global economic crisis. Sometimes "kicking the can down the road" is the smart thing to do.

[dipsydoodle]

1. Not if you're the can.

.

[DCBob]

2. I assume you mean the Greek people are "the can".

Yes, they are getting the shaft.. but they would be getting the shaft no matter what.

[dipsydoodle]

3. Its just that it may be far worse in the future

and in the meanwhile they'll have suffered anyway. Might have been better for them to simply clear the decks now and screw the consequenses elsewhere.

[DCBob]

4. That's the argument many have used but I think it would have been worse for everyone.

if they "cleared the decks", that would likely have started the "dominoes"... and no one benefits from that scenario.

[Zalatix]

9. You mean like it "started the dominoes" in Iceland?

[DCBob]

12. Surely you realize Iceland was a totally different situation.

[dkf]

5. I don't see how it would be better for them if they had defaulted earlier.

At least now they get funds above what their economy produces.

[dipsydoodle]

6. Dont forget that a substantial amount

of the bailout is to pay off previous debt. Repayment of the new debt is being managed - they can't avoid it and its secured against state assets in the case of default.

By managed I mean that repayments will be made in a timely manner if necessary at the expense of paying their public sectors wages and state pensions.

[dkf]

7. But the repayment of debt gets them access to funds that are above what they collect in taxes.

They are still just buying time, getting access to funds as they pretend they will be able to repay the loans.

[dipsydoodle]

10. In assocated news : see here

Greek deal holdouts face long wait to pay day.

(Reuters) - For a small band of bondholders refusing to sign up to Greece's debt restructuring, past experience shows they could more than triple their investments, but may have to wait decades for a payout.

In the small number of sovereign debt negotiations where states have given preferential treatment to one set of investors over another - such as in Peru - settlements have taken years.

Funds challenging Argentina, now eclipsed by Greece as the biggest sovereign restructuring, are finding out just how tough it can be to collect payment from a government. A decade after the country defaulted in 2002, several funds are still racking up expensive legal fees as Buenos Aires refuses to budge.

"The bottom line is it's not easy to enforce judgments against states ... money may be owed but states often can't and don't pay holdouts more than in the debt restructuring. If they did then no one could do a debt restructuring," said one lawyer familiar with previous fights between state and "holdouts".

http://www.reuters.com/article/2012/03/14/us-greece-holdouts-idUSBRE82D16920120314

Chance are this only relates to debt covered by International Law. They obviously take a very long term view inasmuch they know they'll paid eventually. Outsiders rounding up the dent also helps explain why some didn't settle.

[Prometheus Bound]

8. Yes, I think 81% of the bailout goes to pay debt holders.

[dipsydoodle]

11. Didn't realise it was that high

They're sure gonna start needing to round up unpaid and ongoing taxes.