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The distinction between voluntary and involuntary bailins is academic. If the bondholder arrives at an agreement with the bond issuer there's nothing Merkel or anyone else can say about it.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Jun 16th, 2011 at 08:12:43 AM EST
[ Parent ]
that I was afraid to ask :

why would a sane bond-holder accept a "voluntary" bailin?

The Nonsense of purely voluntary Bail-ins

A purely voluntary maintenance of exposure at current market rates would make the sovereign's debt even more unsustainable and, in time, will ensure a default on the new bonds. The only way to prevent the coupon/yield on the new bonds from being close to market rates and thus unsustainable would be to provide the new bonds with seniority or some collateral; but both options are undesirable as a rollover is not a case of "debtor-in-possession" financing and thus doesn't justify such credit sweeteners.

 

If, instead the rollover occurs at original coupon or well below market rates, so as to provide Greece with some debt relief, the rollover option is not purely voluntary and has coercive elements; thus, it is not different in any substantial way from the orderly debt restructuring, or reprofiling, that the ECB and other official sector folks so vehemently oppose.



It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Thu Jun 16th, 2011 at 09:56:06 AM EST
[ Parent ]

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