Here comes the ECB with its threats and demands: Everyone but us shall take a haircut on Greece
As politicians try to find a plan by June 24 that would share the cost of a new rescue with bondholders, Trichet yesterday ruled out the Frankfurt-based ECB setting an example with its own assets. While the bank has said it could accept a plan in which investors voluntarily agree to buy Greek bonds to replace maturing debt, President Trichet said the ECB has no intention of rolling over its own Greek holdings.
Got it? The ECB itself knowingly took in bonds they knew were not going to be able to be paid in full, and now having done so is demanding that everyone except them cover the cost of restructuring Greece’s problems.
The correct response for sovereign governments and other holders is to refuse. Greece, for its part, should then ram down the throats of everyone a restructuring, exactly as normally occurs in a bankruptcy.
Yes, this will probably involve leaving the Euro. So what? There’s no other way out folks.
And yes, I’m well-aware that a lot of folks wrote CDS on those bonds, and that there are also interest-rate swaps that were written that might trigger collateral calls or worse if this is done.
So what? Greece has the upper hand here. In fact, they have the ECB and the Germans by the balls, and it’s time to apply a nice, firm squeeze.