Tag Archives: Greek haircut

Will anyone be left standing at the end of Greece’s marathon?

Illustration by Manos Symeonakis

Of all the European leaders, Economic Affairs Commissioner Olli Rehn is perhaps the last you would expect to have a finger on society’s pulse. Yet it was the Finnish technocrat who produced the most apt analogy at the end of an epic Eurogroup session that ended on Tuesday morning with eurozone finance ministers agreeing a new bailout for Greece.

“In the past two years and again this night, I’ve learned that ‘marathon’ is indeed a Greek word,” Rehn told reporters. There seemed to be an exquisite timing to the marathon reference, even though most journalists were too bleary-eyed at that point to appreciate it. Marathon can refer to one of two things: one of the most decisive battles in history, in which the ancient Greeks repelled the threat of the Persians and a disastrous future, or the long-distance race which marks the lung-busting effort of messenger Pheidippides to inform the Athenians of victory over the invading army.

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A brief interlude

They were hardly dancing in the streets of Athens at the news of the debt deal reached in Brussels but a busker was playing his violin at Monastiraki metro station on Thursday. It was a reminder that despite some 100 billion euros being quarried from Greece’s debt mountain, Athens still has the begging bowl out and remains ensconced deep inside a long tunnel.

The biggest positive from the haircut agreed by eurozone leaders and the banks that hold Greek bonds is that it removes some of the uncertainty surrounding Greece’s present and immediate future. The incessant speculation since the July 21 agreement, which was dead in the water, had a corrosive effect on any attempts both in Greece and the eurozone to tackle the debt crisis. Removing this uncertainty means that at least temporarily the mist has lifted and we all know where we stand.

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A haircut for the bold or the bald?

Illustration by Ilias Makris

Some people will think that the haircut of 50 percent or so being proposed for holders of Greek debt is a get-out-of-jail-free card for Athens and unfair punishment for investors. They would be wrong on all counts.

The writedown, set to be finalized at the European Union leaders’ summit on Wednesday, is the result of failures by both parties. The banks and hedge funds made what they hoped would be a risk-free investment in a country that they knew was the most badly placed of all those standing on the shifting sands of the euro. The market should have factored in the structural problems that plagued both the single currency and Greece, but it didn’t. In accordance with the rules of the game, both sides will pay a price.

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