I wonder where the "no bondholder bail-ins before 2013" comes from. Is it that 2008-13 is a five-year period that they think a priori will allow banks to make their balance sheets whole to the point where they can take a default without blowing up?

That is the only thing that makes sense of the provision. And it is confirmed by the howls from Germany over StressTest 2.0. And, per Basel II definitions many of the Landsbanks will have to be capitalized, not re-capitalized. Has their capitalization to date consisted of "the full faith and credit" of their state governments?

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

UPDATE 1-Germany acknowledges Greece may need to restructure deb

BERLIN, April 13 (Reuters) - Germany acknowledged for the first time on Wednesday that Greece may need to restructure its debt but said such a step could only be pursued before 2013 if it were done on a voluntary basis. In an interview with Die Welt newspaper, German Finance Minister Wolfgang Schaeuble said on Wednesday "additional steps" would have to be taken to deal with Greece's huge debt burden if an analysis from the European Central Bank and European Commission in June showed it is unsustainable.

His comments were the first by a senior euro zone official acknowledging that some form of restructuring of Greek debt may be needed. The ECB and the European Commission have both ruled out such a step, fearful that asking investors to accept changes such as smaller or later repayments could intensify the bloc's debt crisis, possibly sucking in other vulnerable economies. When asked by the daily how Greece, or other countries like Portugal, would ever be able to eliminate their "mountains of debt", Schaeuble said:

"In June we will get a progress report. I'm expecting a detailed analysis on the debt sustainability of Greece, that will be done in consultation with the Commission and the ECB. If this report concludes that there are doubts about the debt sustainability of Greece, something must be done about it."

Asked what should be done, Schaeuble said: "Then further steps will have to be taken."

Schaeuble made clear, however, that any restructuring would have to happen on a voluntary basis if done before 2013, when new rules go into effect that envision private creditors shouldering losses in the event debt relief is provided to stricken euro zone states. "Until then a restructuring could only take place on a voluntary basis," Schaeuble said.

This strikes me as about as reasonable as specifying that Grandpa can't die before 2013 because that would be awkward for the heirs. What ever the color scale is for unreality, this requires the deepest shade.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."