It’s cheaper to declare Greece bankrupt than to perpetuate the fantasy and play at a “re-negotiated” amendment to the existing loans. The real at-risk loss is a “mere” € 39.9 billion euro !!
What, you think that crazy?
It’s simple. Tote it up.
The outstanding amount the Troika is going to pony up is € 36.1 billion euro – not the € 7 billion the politicians keep talking about. (€ 7.2 billion balance tranche of second loan; € 1 billion profit on Greek bonds; € 10.9 billion diverted from the Greek bank bailout; and € 17 billion remaining tranche from the IMF.) The “loan-gift” , i.e., the real amount of the “loan” to repay (see below) is really only € 144 billion.
So the total the troika is really out if it renegotiates a new agreement is: € 180.1 billion.
So the loss is really only € 59.9 billion. The € 240 billion in loans less the real amount to be repaid, € 144 billion and the savings from not paying the balance of the loans, etc. of € 36.1 billion.
But it is still really even cheaper !
The Troika knows that handing over the current € 36.1 billion will “work” only with a new follow-on loan of at least € 50 billion. And that loan will also only be a “loan gift” where its maximum value will be 40% or € 20 billion.
So take that € 20 billion loss off of the € 59.9 billion that could be recovered – and the real risk of loss is only € 39.9 billion !!
As always, it is slick Clinton speak that gets the poor taxpayer into trouble. It all hinges on what the meaning of “is” is. In the EU case, namely, is there really a “loan” of € 240 billion from the Troika to Greece?
In fact there is no loan of € 240 billion !
What again, yuou think that crazy?
Every newspaper and politician is screaming bloody murder – the Troika and Greece have to cut a deal to protect the € 240 billion loan and prevent “at all costs” a catastrophic loss to the remaining Euro Group countries.
Would a “gift” by any other name smell as sweet? You bet. Even sweeter.
This “loan” to Greece extends from 10 years to almost half a century before it need be repaid. It carries an “interest payment” that is neither “interest” nor “payment”. The interest is peanuts. And it is not paid – until the loan is “repaid” !
The London banks value this “loan – gift” at, maybe, 40% of its face value. (Present value. Also the value per the International Accounting Standards for sovereign debt.) So the Troika has already made a gift of € 120 + billion to Greece – on the existing loans .
Humpty Dumpty could only make a word mean what he wanted it to mean, but he couldn’t get others to agree.
EU politicians put him to shame: they can label dung a rose and get people to believe that the dunghill “loan – gift” smell is in fact the scent of roses.
So again, where is the European Alexander to step up, sword in hand, to solve the “unsolvable problem” ?. At this point, the politician who takes up Alexander’s sword will become the Hero of Europe.
Where is Alexander when Europe needs him now ?