And here is the cute (legally probably correct) rationale: changes in the terms of a debt instrument could be viewed as a property rights violation and in Europe, property rights are human rights. Now thank God that there is a European Court of Human Rights to protect the property rights of hedge funds. Of hedge funds whose only reason for having this property (the Greek debt instruments) is to use them as blackmail for taking (legally, of course) property away from someone else – from tax payers!
This is just one more reason why one should hope that we will see, next March, closing time to this charade of the last 2 years by allowing default to happen. The existing debt would be separated from the Fresh Money requirements. The latter would come from EU/IMF (for budget deficit) and from the ECB (for current account deficit). And the holders of existing debt would be invited to form a Steering Committee which has the mandate of all creditors to negotiate with Greece a rescheduling of maturities. No haircut; new evergreen bonds instead!
Obviously, at this point Greece has to start being serious about serious things. No more games about promises which are not kept, etc. Much more pain will have to come over Greece’s public sector and public administration. But there should be a carrot for all of this.
That carrot should be a giant investment program for the Greek economy financed by foreign investors, EIB, EU Structural Funds, etc. (but not the Greek tax payers). So giant and so well thought out that one could expect hitting bottom of this crisis and returning to growth already in 2012.
The above Fresh Money for budget and current account deficits will be about 3 BN EUR per month. After hearing about 3-digit BN EUR figures for so long, European tax payers will find that amount to be quite reasonable, particularly since it would now serve a positive purpose (instead of throwing good money after bad). For once, there would be light at the end of the tunnel.