Beware The Athenian Haircut

While many are still focusing on the fallout from the Alternative Vote (AV) referendum and the local elections, events inside the Eurozone are also moving on, and although relegated to the inside pages, the story is probably of more importance in the longer term.

And, as with much that passes before the gaze of the Fourth Estate, the view and indeed the facts presented differ significantly, depending on the source. However, what is not in dispute is that there have been talks involving the Greeks, from which it can be concluded that there have been talks.

That is, of course, not enough for the speculation merchants, and so a little spice has been added. “’Greece to dump Euro’ report sparks chaos and denials” from the Daily Mail was typical. But the “chaos” was only sufficient to cause the exchange rate between Euro and US Dollar to decline from 1.44 Dollars on Friday afternoon to 1.432 at 1030 hours today.

And the papers can’t even agree who was at the talks, held on Friday in Luxembourg. While the Mail reports that “Greece was not represented at the meeting”, the Maily Telegraph asserts “Finance ministers from Germany, France, the Netherlands and Finland met their Greek counterpart ... in Luxembourg”. The Mail also has a different cast list: out go the Netherlands and Finland, and in come Spain and Luxembourg.

In fact, the Mail is so keen to present the desired agenda that the article talks of potential default, or Eurozone exit, before running out of steam. At least the Telegraph states clearly that a restructuring of Greek debt was on the table, but even then, the H-word is missing.

That is H as in Haircut: this is where those further down the food chain of lenders have to take some losses, which has already been priced into interest rates, something I discussed at the end of last month – predicting that Greece would be an early candidate.

That this is a distinct possibility is underscored by the Guardian’s analysis, which includes this statement: “ ... creditors were looking at a range of options for Greece including a fresh bailout, giving it longer to repay its debts or forcing banks to take a loss on Greek bonds” [my emphasis].

So remember that you can forget seeing the full picture on the Eurozone in either Mail or Telegraph, and that the place calling it right thus far is Zelo Street. That would be this blog.

I’ll post something on Portugal and its bailout later.