Greece – No PSI

Posted by on Dec 13, 2011 in Uncategorized | No Comments

As expected banks couldn’t agree to a haircut.  Now Greece, the EU, the IMF, and taxpayers, will pay out about about $11 billion of principal and interest before the end of the year.  I don’t know who holds the bonds maturing this year, but some of that money is probably finding its way into banks that survive solely on the grace of central bank funding.

The next big payout is due in March.  I suspect banks will once again get a nice trip to Athens.  Enjoy some food, some sightseeing, and “in spite of great efforts” once again fail to reach a deal, and wait for the Troika to pay Greece so that they can get paid again.  If my travel brochures are accurate, it will be more junior bank negotiators then because the senior people will save themselves for the May negotiations when the weather should be just perfect for a quick getaway to the islands.

Why would any bank agree to a haircut when they are getting unlimited virtually free funding on the one hand, and the Troika has shown zero willingness to stand its ground and force a default?