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I can't even parse it. What does involving private creditors in future debt restructuring entail, what does not involving them entail; and is it Germany's government or those at odds with it who fear scaring investors, scare with what, and why fear a scare?

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Thu May 19th, 2011 at 05:04:05 PM EST
[ Parent ]
I suspect that what Stark fears is that numerous banks in France, Germany and the UK will have losses that will expose the state of their balance sheets, precipitating a contagious collapse of the financial house of cards. If your balance sheet is underwater, not only do you not want to see more losses, but also you cannot accept exposure of previous losses. The fear is that a restructuring would lead to a series of events that leave them all exposed as bankrupt.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu May 19th, 2011 at 10:20:15 PM EST
[ Parent ]
I have a hard time buying it. If this fear were legitimate, then why are they forcing Greece to default?

If this were at all a possibility, why didn't they grant Greece the money (at an IMF % rate) and then come back to flay Greece through well practiced EU methods and fines a few years into the future?

by Upstate NY on Thu May 19th, 2011 at 11:11:01 PM EST
[ Parent ]
Perhaps it is not all rational. See the link below from naked capitalism.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri May 20th, 2011 at 12:54:06 AM EST
[ Parent ]
Because they reckon that they can delay it until 2013, which is estimated as the date when the German banks will have more or less managed to pass their losses to the public (by selling rotten assets at nominal value, mostly).

At least that's been my understanding so far. On top of that indeed, there may be lack of full rationality, or rather of proper evaluation of the situation.
Plus, maybe (I know, that's a long shot) some apologists for neo-liberalism actually believe in their crap.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Fri May 20th, 2011 at 05:10:20 AM EST
[ Parent ]
Wow, so they are gamblers no better than the folks sitting at tables in Atlantic City, NJ.

The idea that back in early 2010, they could foresee that the Greek people (and Germans and Finns etc.) would be committed to this program into 2013, that's quite a gamble.

by Upstate NY on Fri May 20th, 2011 at 09:38:06 AM EST
[ Parent ]
If they were underwater in 2010, they would lose nothing by making that bet. You can only go bankrupt once - there is no such thing as "double-plus insolvent."

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 20th, 2011 at 12:34:26 PM EST
[ Parent ]
IfSince they were underwater in 2010, they would lose nothing by making that bet.

Fixed it for you.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Fri May 20th, 2011 at 02:45:43 PM EST
[ Parent ]
They could have always nationalized the banks.
by Upstate NY on Fri May 20th, 2011 at 04:00:12 PM EST
[ Parent ]
From the point of view of upper-echelon bank management, bankruptcy and nationalisation come to the same thing: They go out on their asses, because they're incompetent dickweeds.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri May 20th, 2011 at 06:34:48 PM EST
[ Parent ]
Perhaps this will help.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri May 20th, 2011 at 12:51:11 AM EST
[ Parent ]

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