Mumbo-Jumbo

Sorry but I have to write this blog entry in English as some of the words being circulated in the recent episode of the Greek Tragedy have not and will probably never make it to Turkish in the manner they are meant in English. I do also wonder how these things appear in Greek press with Greek letters!

We have been anxiously following the different options Europe has been considering to resolve the Greek debt problems. Ideas that have been circulated are: maturity extension, debt restructuring, soft restructuring, debt re-profiling… By the time policy constipated politicians end up with a decision I can guarantee you that, whether they come up with, is bound to enhance our financial vocabulary. And I thought this was the responsibility of the old maestro Greenspan with his relentless obfuscations. 

Soon-to-be IMF chief (according to bookies, I am not taking sides!) French minister Lagarde’s spokesperson said to WSJ during the weekend “If the banks decided unilaterally after contacting the Greek authorities to offer a lengthening of the repayment timeframe, she wouldn’t be against it.” It was just a week ago that she said restructuring/rescheduling is “off the table”. Well that’s the kind of consistency we need from the new IMF head. And if this is not the good old debt restructuring what is it then? It is a new structure for an old contract and hence restructuring. I do understand that everyone has a good reason not the name this in a certain way but it is what it is… Thank God, Fitch seems to have put on end to this mumbo-jumbo by telling the Europeans “Guys, call it whatever you please, for us it is all default, full stop. And here is another 3 notch downgrade for good humour”.

I have been arguing since early last year that restructuring was inevitable. The good news is that banks are now in much better position to take the blow. They have been strengthening their balance sheets for a while (I wrote about that as an explanation as to why Euro was getting dearer despite all the mess). However, the bad news is that the credit rating of the second “I” in the PIIGS is now under pressure. Alas there is growing risk now that politicians will lose the very thing they have been trying to protect with all this bickering: the integrity of the Eurozone.

Dollar weakness has been a great boon for the American economy and the corporate sector. Hope the same will happen for Eurozone when Euro tanks, albeit a bit late. It has already done so against the Swiss franc.