Ireland has other capital resources (e.g. Pension reserve fund) it could use to buy out some of the debt. But then the ECB wouldn't get 5.8% on the money it is so generously using to "bail-out" the Irish: Money it borrows at 3% and thus makes a cool 3% on.

You see, we don't want a fiscal transfer Union from the centre to the periphery - its supposed to be the other way around...

Index of Frank's Diaries

Then what the fuck are they supposed to spend the money on?

The whole damn point of buying back your own bonds at a discount is that this increases the net social wealth, because it removes a default premium (the default premium on bonds outstanding is a cost to the bondholder but not a gain for the issuer - by buying back the bond at a discount, the issuer gets to book the risk premium as a gain... but this doesn't cost the holder anything).

- Jake

Friends come and go. Enemies accumulate.

Talos:

in the Greek case it's not that Greece is forbidden to buy back part of its debt in the going rate (at 70c to the Euro), just that it cannot use the Special Fund's money to do so.

A possible solution that is a win for Greek oligarchs and a win for the Greek Govt. and people:
Make a deal with the oligarchs that they buy the debt at the best price possible, (rumors of default could improve their price), with the agreement that the Greek government will then buy the debt from them at a few percent above their purchase price. Retiring loads of debt would increase the credit rating of Greek bonds which could be issued to the oligarchs as payment, which  would, to say the least, greatly depress the value of CDSs on the original bonds, so one or both parties could sell CDSs short prior to the transaction. What is good for the goose is good for the gander! :-)

"It is not necessary to have hope in order to persevere."