Greek debt restructuring likely a default - S&P

[villager]

Source: Reuters

Greek debt restructuring likely a default - S&P


BERLIN

(Reuters) - Standard & Poor's reaffirmed a voluntary debt restructuring for Greece as currently foreseen by euro zone governments would likely be deemed a default, its head of European sovereign ratings told a German newspaper.

"Past experiences show that restructuring the debt of a country, whose creditworthiness is rated at CCC like Greece is currently, tend not to be voluntary and investors must sustain losses," Moritz Kraemer told Die Welt in an article due to be published on Tuesday.

Euro zone officials have told Reuters a second bailout plan for Greece is expected to fund Athens into late 2014 and feature up to 30 billion euros in aid from a voluntary private sector participation on the basis of the so-called "Vienna Initiative." S&P's Kraeemer said whether extending a bond's maturity voluntarily or not is of lesser importance.

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Read more: http://uk.reuters.com/article/2011/06/20/uk-eurozone-greece-default-idUKTRE75J5AF20110620

[Atypical Liberal]

1. I don't know what to make of this situation.

I don't know what to make of this situation.

One one hand, I don't know why Greece is wanting to be on the hook for loans anyway. On the other hand I'm sure that it would mean cutting services which is never popular with the people.

[JDPriestly]

2. So investors gambled, i.e., they agreed to take a risk on Greece's solvency.

The investors lost their gamble. They have to take their loss.

What is so mysterious or objectionable about that?

When you loan money to someone you have to consider that you may not get it back.

When you buy securities, you also have to consider that you could lose your entire investment.

Many American homeowners learned this. Some of them paid on their mortgages for years and lost their entire house, their entire equity, their entire investment.

The bondholders should have thought of this before they invested in or loaned money to Greece.

The investor is usually in a superior position, had more knowledge about the economy, about the likely solvency of the prospective debtor, about the likelihood that whatever it is they are investing in or loaning money for will bring a return. The investor tacitly agrees to take part or all of the loss if the investment goes bad.

That is why we insure our houses. That is why our mortgage lenders insist that we buy insurance on our houses when we enter into a mortgage.

Why are these investors so shocked at the probability that they made such bad investments? There is nothing surprising here. Loan money to your brother-in-law who is a drunk, and you probably won't get it back. The money will be spent at the liquor store. That is obvious.

[Imajika]

3. It's just that simple isn't it?

"The investors lost their gamble. They have to take their loss."

Exactly.

And you know what I think, if Greece simply defaulted giving itself a real path out of "austerity" investors would be back in no time. Yeah, things would suck for awhile, but at least they wouldn't suck forever.

If you or I invest in a company that goes belly-up we lose all our money, so what makes these banks and investments houses that invested in Greece so special?

[Fool Count]

5. In fact, as experience of other sovereign defaults shows,

more people will be willing to lend Greece more money at lower interest after it defaults. As well they should be. Who would you
rather lend money to - a bankrupt who can't even pay interest on his huge debt or someone completely debt free? That's a
no-brainer really.

[xchrom]

4. Protecting who is doing the loaning or investing?

I.e. The Germans, French & Americans.