Thursday, 9 December 2010


It now appears to be a foregone conclusion that Greece will get an extension on our bailout loans - adding one year and a half to the amount of time for which our national sovereignty will remain suspended.

Apparently our Government cannot believe their luck. Armed with this new-found confidence our PM was able to dismiss Roubini's latest batch of prophesies and the Government reiterated its bizarre fantasies about there being no need for default (there isn't; there's national interest though). In fact, some members of the Government even claimed there's no need for further layoffs in the wider public sector. Come the inevitable, these pronouncements will fuel unimaginable anger, so they really ought to be more careful.

This is of course only a rehearsal for the refinancing of ever more Greek debt via IMF/EU funds, swapping ever more debt agreed under Greek law (which is easy for us to default on) with debt agreed under English law (which is harder to default on).

Once again, our creditors in the banking sector win as our supposedly super-senior creditors are forced to take a small haircut in their place. So far, so Vampire Squid - like, until one stops to consider who it is that holds all of these Greek bonds.

Because last time I heard (i.e. today), the European Central Bank was pretty much the only buyer.


How far can our obligations be extended? Here's the benchmark case of the extremely intelligent Icelanders, who saw the writing on the wall and defaulted when they could. They're now paying off the British and Dutch over 30 years, starting from 2016.

This is going to become a blueprint for other countries - although my concern is that by dragging our debt saga out so much we're becoming too political, too iconic in way, to be given this way out.

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