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About that 50% cut in Greece, it's not that simple: Foreign banks held 143 billion euros worth of Greek government bonds before the crisis. By the time the PSI deal happened, that amount had shriveled to 23 billion Euros. 50 billion of these bonds were bought by Greek Pension funds when bankruptcy was easily foreseeable, and Greek banks. Greek banks are recapitalized through loans that burden the Greek tax-payer (though not public banks). Greek pension funds bought ~10 billion Euros worth of bonds (and lost something like 50% at least of their value), another 5 billion went in the hands of private persons and organizations in Greece. Thus the net effect was the same: the Greek state saved the EU from the contagion that would have resulted had the EU banking system had to face 80 billion worth of write-offs at that stage....

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Tue Oct 9th, 2012 at 06:53:00 PM EST

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