Sunday, July 12, 2015

Odious debt and the Greek referendum

Seems like the referendum has made any deal that is "worse" than what was voted on by the people impossible.

Even if the Greek government surrendered completely and accepted whatever deal anyone was willing to offer, its clear that the deal would not be considered legitimate since it was worse than what the Greeks rejected in their referendum.

Any debts incurred by this new deal could be considered "odious debt", since it was obviously against the will of the nation, and so for the creditors, there is really no upside in offering any kind of deal.

When the creditors talk about "trust", they are clearly worried that Greece would repudiate the deal as soon as the funds are released.

It's also clear that as soon as banks are reopened, no one would leave a single Euro in a Greek bank anymore, so the cost of recapitalizing the Greek banks would be absolutely horrendous.

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