June 29, 2011 5 Comments
The details of the French Banking Federation (FBF)’s proposal for a voluntary Greek debt rollover are out, but the plan is still being discussed by banking federations across the euro zone. According to the FBF, the plan’s purpose is two-fold:
Further to our earlier discussions, we understand that it is now critical (i) to structure a voluntary mechanism allowing Greece to reach €30bn of government financing from private investors by July 1, 2014, and (ii) to prevent credit event on Greece CDS.
The debate on what exactly constitutes a credit event has been raging for weeks and ultimately seems to be a question of semantics. Let’s pretend the credit ratings agencies will go along with the French proposal and will agree not to give Greece a “D” rating. Is this plan the magic bullet needed to return Greece to solvency? Even under the rosiest of assumptions, I highly doubt it.