With the announced financial plan to save Greece, inquiring minds are already asking whether Europe has put the loaded gun on the table. Somebody is saying that "It’s a deal – and a pretty good one, too".
While the devil again will be in the plan's details and future arrangements, Mr Van Rompuy said "We hope that it will not have to be activated". As a matter of fact the mere existence of the plan forestalls the possibility that Greece might fail to refinance itself in the near term and send a clear message to markets and speculators. Yet the fact that they hope not to activate it, it might mean that it would be a mess should it be activated.
I am not sure if the deal can be construed as special resolutions regime for sovereign default or a leap forward towards greater integration and cooperation. It could be simply a naked gun put on the table to buy time.
I think that the mechanism put in place, particularly regarding its share within the eurozone proportional to the ECB capital share, could be further developed and worth pursuing for a future common issuance of EU bonds. On the other hand, should Greece or other countries need to activate such a mechanism it is likely that those countries involved in the mechanism need to issue bonds to refinance the country in need or default. It's worth repeating that the countries more concerned by the mechanism (27% for Germany and 20% for France, or in the case of Greece's default and if the Greek share were to be excluded, 28% and 21% respectively), are the same countries whose banks (French and German) hold Greek bonds for about 70%.
It means that the mechanism is not actually in place to save Greece but to save French and German banks, main bondholders of Greek sovereign debt, from incurring in losses.
The above circumstances again make the case for the issuance of EU bonds much stronger. At least to simplify this Ponzi scheme where EU governments' money is being reinvested into the scheme to repay previous investors, mainly banks who incidentally in the past were saved by those same governments. In this respect, the plan for Greece indicates some EU countries' smell of fear.
UPDATE of Sunday April 11th: in the the latest Ponzi, somebody is doing God’s work as Leaders of the 16 eurozone nations have agreed to fund up to 30bn euros in emergency loans for debt-hit Greece, if the country wants the cash.
The price of the loans will be fixed using IMF formulas, and be about 5%. Luxembourg Prime Minister Jean-Claude Juncker, speaking for eurozone finance ministers, said there were no elements of subsidy in the loan proposal. "The total amount put up by the eurozone member states for the first year will reach 30bn euros," he said. Mr Juncker added that the financing would be "completed and co-financed" by the International Monetary Fund.
I wonder if the above is the right way to stop the Ponzi game.