The article spells out exactly the procedure for a restructuring of Greece’s debt which I have been arguing for over a year now. By now, it may be too late to do this but it certainly would be worth a try to re-visit the issue. When the article was written, Greece was the country at issue. Today, this roadmap would have to be applied to all PIIGS-countries.
The principal elements of this roadmap are:
1. Banks have to recognize the full damage at once by making adequate loan loss provisions (the level of which should be mandated by the ECB).
2. Immediate re-capitalization of all banks affected by this via government preferred stock (unless banks can handle their re-capitalization on their own).
3. EU-guarantees that all savings and retirement plans are safe (possibly combined with a temporary deposit freeze in certain countries).
4. Temporary capital controls in those countries affected by the risk of capital flight.
5. A new and plausible debt structure for affected countries including a variable (and tolerable!) interest rate during the first years (interest tied to economic performance or to a percentage of government expenditures, or whatever).
6. No Euro-exit for Greece!
Effect 1: the debt maturities of existing debt are taken care of via the above rescheduling.
Effect 2: Fresh Money is required only for the financing of budet deficits (thus: much more manageable amounts).
Effect 3: It becomes justifiable for tax payers in surplus countries to underwrite the Fresh Money via guarantees because (a) the amounts involved are now manageable and (b) they serve a meaningful purpose.
Time-line: declare a 1-week bank holiday on a Friday evening and get all legislation passed during the next week.