News stories continue to suggest that Greeceonce again appears on the verge of reaching a deal with its private sectorcreditors on how much of a loss they would be willing to accept on their bondholdings. The latest numbers suggest a 70% write-down. A pretty strikingcomedown for what is supposed to be a “voluntary default” and, hence,not subject to the triggers of a credit default swap on Greek debt.
Naturally, the spin surrounding the proposedagreement is that this is a “one-off” and that other troubledperiphery nations shouldn’t even begin to think of securing a comparable deal.But the inherent tension between securing a write-down on Greek debt which moreclosely mirrors the disaster which is now the Greek economy, and the desire tominimise the potential contagion effect is rearing its ugly head already, andmay help to explain some of Germany’s recent machinations.
