I caught the news about the possibility of the Greeks defaulting on their debt last night, but wanted to check I was understanding things properly at the time. Not that my understanding was helped any by checking what the BBC were saying as last night they were following the line that it wasn’t a default really, though thanks to their wonderful habit of updating articles without mentioning the fact you’d not know that this morning. Now of course the headline isn’t “Greece defaults” but:
“Greece aid package boosts stock markets”
And any mention that some people might consider that forcing lenders to swap the loans they’d already made for longer term ones at worse rates might be considered to be a default is saved until the third paragraph and then it’s just due to those nasty ratings agencies.
But for comedy value there’s Angela Merkels response:
“I strongly welcome the voluntary contribution from the banks.”
Sarkozy continues to deny reality saying:
“If the rating agencies are using the word you just used (default), it is not part of my vocabulary.”
I wonder if I could avoid paying tax by saying it wasn’t part of my vocabulary. But as Archbishop Cranmer observes the EU has lots of form for this sort of linguistic denial. The Greek default is apparently a unique and exceptional thing, but haven’t we heard that before? And of course it’s so unique that “relaxation in lending conditions was also extended to bailed-out Portugal and the Republic of Ireland”. Most worryingly though the quote seems to have vanished it looks as though the Greeks have decided that because they’ve stiffed their lenders and put off repaying anything till tomorrow they no longer need to pursue austerity measures. To be fair so far why should they – if it looks like they’ve got problems the EU will bail them out, they have to to save the EU project. Stealing from the BBC again Frank Schaeffler of the liberal German Free Democrats Party seems to give the only reaction that makes any sense:
“Without the possibility of leaving the euro the debt reduction brings nothing – Greece will remain on a drip-feed from creditor countries for a long time”
Osborne seems to continue to be in some alternate reality hailing the idea to lend the Greeks more money as
decisive economic action. The BBC article does go on to quote John Redwood and Bill cash though both of whom seem to still be at least slightly in touch with reality and how debt works. The markets are certainly not under any such illusions, and given the choice between what the market says and what the politicians say history says bet on the market. Finally in case anyone is as confused as all this as I was the Wall Street Journal has a rather good explanation of how credit agencies work and what the various types of default are.
