Finally someone dares to go ahead and say what is on everyone’s mind, namely that proclaiming a 60% “haircut” as voluntary is about the dumbest thing to ever come out of ISDA. As is well known, the ECB and the entire Eurozone are terrified of what may happen should Greek CDS be activated, and “contagion waterfall” ensue. The fear is not so much on what happens with Greece, where daily CDS variation margin has long since been satisfied so the only catalyst from a cash flow market perspective would be a formality. Where it won’t be a formality, however, is for the ECB which has been avoiding reality, and which will have to remark its entire array of Greek bonds from par to 40 cents on the dollar, which as Alex Gloy indicated earlier, will render the central bank immediately insolvent all else equal.
3 Replies to “Barclays Explains Why A 50% Greek Haircut “Would Be Considered A Credit Event, Consequently Triggering CDS Contracts” | ZeroHedge”
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I recently read <a href="http://bellacaledonia.org.uk/2011/08/25/why-iceland-shold-be-in-the-news-but-is-not/"this article about Iceland and where they are at today after their 2008 ‘default’. What do you think about it and is this something countries like Greece could (or should) consider doing? Thanks.
Sorry, screwed up the link. Here it is again, http://bellacaledonia.org.uk/2011/08/25/why-iceland-shold-be-in-the-news-but-is-not/
Yes. But the more inter-linked you are with the global financial system, the less able you are to pull it off. Iceland, Greece and Portugal may be able to do that, but not Italy, Spain and most likely Ireland.