31.1.15

Lies, damned lies and Greece’s debt default

By BRETT ARENDS COLUMNIST
Syriza party leader Alexis Tsipras actually suggested Germany owes 
Greece a lot of money for
World War II atrocities.
Let’s stop playing games and get it over with

Can we stop it, please, with the Greek debt panic?
Can we stop pretending that this crisis is something it isn’t, or that it involves principles it doesn’t, or that there is no alternative other than more pain on the streets of Athens?
There’s been a renewed flap following Sunday’s stunning Greek election victory for the radical Syriza party, which wants to renegotiate the country’s crippling debt burdens and escape the deflation trap imposed by external bankers.
It’s time for some hard, yet simple, truths.

Greece’s gross debts add up to around $320 billion in nominal value, according to the International Monetary Fund. That’s big compared to the Greek economy, but tiny compared to the world outside. It’s less than 3% of the entire eurozone economy, which is about $13.5 trillion.



So even if Greece refused to pay one more nickel of its debts — an outcome no one is suggesting — the eurozone could make up the difference with about eight days’ output ... or an hour’s money-printing by the ECB.
And the real value of the Greek national debt is even less than this nominal sum. That’s because the markets have already adjusted themselves sensibly to the situation. According to the National Bank of Greece, shorter-term government bonds are already trading at about 85 cents on the euro, while longer-term bonds are down to between 65 and 50 cents on the euro.
According to calculations by Felix Brill, chief economist at investment firm Wellershoff & Partners in Zurich, Switzerland, publicly traded Greek government bonds are trading at an average of 70 cents on the euro.
A debt default would probably make things better. It could hardly make them worse.



So, in real terms, a big chunk of that Greek debt has already been written off. Crisis? What crisis?
Second, the idea that a partial Greek debt default would somehow represent an earthquake in the world of finance, or endanger the eurozone, or be an improvident reward for the reckless and the feckless, is nonsense.
Nobody forced German and other bankers to buy Greek government bonds at absurd prices during the bubble.
Nobody forced banks to lend money to the Greek government on nearly the same terms as they lent to, say, the German or Dutch governments.

http://www.marketwatch.com/