"....The French proposal, which will feature in the discussions at a meeting tonight in Rome, is aimed at organising an orderly participation of private creditors in a resolution of Greece's debt problems. It calls for half of the proceeds from maturing Greek bonds to be reinvested in 30-year Greek bonds. A further fifth of the proceeds would be invested in high-quality bonds as an insurance policy to guarantee repayment after 30 year."
Sounds like a plan that was cooked up from "Stinkie Pinkie Land". But seriously...
"....After weeks of wrangling, they decided that any such participation should be "voluntary"."
In other words, they couldn't find a lawyer on planet Earth that would agree to their alternate plan (which would force creditors to take EXTREMELY heavy losses almost immediately after the purchases would've been made).
"...Yet most ways of getting a substantial private-sector contribution in the Greek bailout would trigger a default call by rating firms, raising questions about how the ECB would treat the Greek bonds that it holds as collateral against loans to euro-zone banks."
Exactly...which is why the S&P decided to junk Greece debt rating back in April. They know Greece will not fulfill its end of the bargain (given enormous problems surrounding the Greek government's ability to repay debt).
Speaking of which, I don't think the Greeks will approve the plan (it's not like the plan will work anyway). If it does get passed, I think they will still default on debts set to mature within the next three years...I wouldn't be surprised to see them come crawling back to the ECB for more money.
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