Look at Greece’s long term yields on its sovereign debt. Greece will have to default (soft or hard) and the ECB is sleepwalking into disaster if it maintains its current delusional silence on the matter.

Looks to me like arch-federast Vince trying to slap some sanity into the Eurozone before it’s too late.

I’m not sure that it is possible to slap sanity into the Eurozone before it is too late, because I think it is too late already.

The normal thing that happens with Economic crises has happened here – an attempt to stabilise the situation by throwing in money to benefit the ruling political and financial elites. And wierdly, it always fails (because the elite have lost the market, and you cannot force the market).

I know within a tiny Westminster-focused world this might constitute news, but this is not news.

The UK is not in the eurozone so has between no and a tiny influence on negotiations.

Vince Cable is not in the kitchen cabinet so has between no and a tiny influence on the UK government.

Moreover, there is a world of difference between a “default” and a rescheduling within the even more pedantic language of debt professionals. If you note, Mr. Cable advocates a “a negotiated rescheduling”.

The challenge is to renegotiate without tripping over the terms of the CDS. The debate about whether the debt needed to be amended or not happened months ago.

What Vince Cable is saying is the conclusion I came to some weeks back:

http://zelo-street.blogspot.com/2011/05/beware-athenian-haircut.html

and in any case, for those likely to be at the end of the queue, it’s “priced in”.

Of course, if Greece does it, Ireland and then Portugal will follow. The trick will be to hold everything together in the Eurozone. But then, every right leaning pundit has been writing off the Euro since before it was introduced, and it’s still there.

Vince has only waited until default is regarded as all but inevitable by everyone … brave man!

it’s probably true that Greece, Ireland and others should default to some extent, but default is not without its problems, to put it mildly.

here is the governor of the Bank of France setting out the “horror story” he sees following a Greek default.

(he might be over egging things, I don’t know)

“I have a feeling this is going to affect the markets.”

I have a feeling a fart in a jar would have more of an effect on the markets than Vince ‘nuclear option’ Cable’s ramblings, but that’s only my opinion.

Of course Greece should default (and default properly – not, as someone put it, “negotiated rescheduling”), along with Ireland, Portugal, probably Italy and Spain… At the very least it would be hilarious.

Iceland did it and no they’re thriving. Ok they wont get credit for major capital projects but they don’t need or want it.

Of course Greece will eventually default. Any rescheduling of debt maturities is a default and they would need to be rescheduled in extreme to have any meaningful effect. Therefore, haircuts on securities is what is required. Nice to see senior politicians catching up with events 2 years after everyone else. The only problem is those nice chaps in Brussels and Frankfurt have threatened to send them back to the stone age if they try and reschedule debt. If the ECB who hold so many of the securities pull the plug on the Greeks then they really are toast. Moreover, the haircuts would be imposed on northern European taxpayers as shareholders in the ECB. The political fallout could be quite extreme to say the least. Anyway, they would be out of the eurozone and possibly the EU to be followed by?

Probably the best negotiated solution now would be for the debt to be exchanged for triple-A paper issued by the new EFSF agency at a discount. However, that would still see the taxpayers of the north bailing out the south.

What is being inflicted on the euro periphery is not sustainable. However, what is being visited upon them is not from the market, but from public officials in Brussels and Frankfurt. They created the mess and are providing endless entertainment in their inept attempts at trying to clear it up.

First steps in the turning the tide of globalisation?
@3 The UK is a major contributor to the Irish bailout, so VC’s comments would carry more weight if (or more likely when) they reach the same point.
It would also be interesting as it would pit him squarely against Osborne.

“I have a feeling this is going to affect the markets” is the kind of keen insight I’ve come to expect from this site, and it’s no wonder Cable’s sitting up and paying attention.

In CDS terms, a restructuring *IS* a default.

They can lengthen the maturities of the bonds, but that will trigger CDS and in the long term cost the Greeks more, as the bonds coupons will extend. it will enable them not to default for the next few years, and give them breathing space but in real terms this is just kicking the can down the road.

Any haircut would effectively cause a major crisis in the Euro, which is really what these bailouts are protecting.

Greece should simply up and leave the Euro – that way they can effectively default through devaluation, much like the Icelanders did.

It’s not just Cable – important people like Junker are making the same noises.

The default was inevitable – it just took a while for the politicians to realise it.

next stop – banking crisis part deux – oh yeah baby all those banks we own (and a lot we don’t) all have their willlies in the fire of the EU peripherals.

House of cards.

http://www.businessinsider.com/imf-greece-bailout-tranche-2011-5