Thursday, 27 October 2011

That Deal (2)

Again, according Zerohedge, the EU's numbers don't add up (this is where the July bailout deal fell apart). The proposed 50% haircut on Greek debt (which hasn't even been agreed yet) is not even 50% but only 28%. Here's his post in full (his emphasis):

Just the math, something Europe is unable to do:

  • Greece has €350 billion in total debt including about €70 billion in Troika "post-petition" loans; these are untouched.
  • Of the €280 billion, roughly €75 billion is held by the ECB: this, like the Troika loans, will be untouched.
  • This leaves just ~€200 billion in actual debt to undergo a haircut.
  • Apply a 50% haircut to this debt (ignoring the fact that of this about €35 billion is held by Greek pension funds, and once the realization that Greek pensions have been cut in half dawns upon the population, the result will be the biggest riots ever seen in Athens yet).
  • Total debt to be cut: just about €100 billion.
  • Hence, of the total €350 billion, just €100 billion is eliminated, most of it used to backstop and service Greek pension and retirement obligations
  • €250, or the residual, of €350, the original, means 72%, or a 28% haircut.
  • Greek GDP was €230 billion on December 31, 2010 and declining fast.
  • And that is how a 50% haircut is "cut" almost in half
But no worries, shares are all up strongly this morning, so everything must be rosy in the garden.


  1. TBF, what's your guess on how long until this latest palliative has passed through the system and the patient once again exhibits signs of mortal decay?

  2. @JiC Hard to tell in truth. They'll keep it going as long as humanely possible but they can't cheat economic gravity for ever. If I knew the answer I'd stick a bet on it :-)

    It'll rumble on for some time, but when the end comes it will be swift, as other similar events have before it - the timing will be when everyone leasts expects it.