Death Star Economics



The ECB is a wizard

EU officials have extended the judgment day deadline, i.e. the deadline to strike a deal. for Greece to 15 February. Reuters had estimated a six-week administration period between agreeing on a deal and 20 March, when the next pile of debt matures. In the latter case, a solution would have had to be found this Thursday.

Otherwise, Greek protesters burned a German flagAngela Merkel pretended not to care and said she wouldn’t force Greece to exit. Dutch PM Mark Rutte, however, didn’t hold back and said the EU could live without Greece, so there you have it.

Also, the European Central Bank showed how it could make $11bn of Greek debt disappear “just like that”. With the debt swap dance in the next round, but I will let Felix Salmon explain it [in very clear words]:

The details are sketchy, but to a first approximation, it seems to work like this: the ECB has €50 billion of Greek bonds, which it bought for €39 billion. It will sell those bonds to the EFSF for €39 billion, which in turn will “return the bonds to Greece”, whatever that means. Greece, in turn, “will then agree to repay the EFSF” — which may or may not mean issuing new bonds to be held by the EFSF. Since Greece will now have €39 billion of debt rather than €50 billion, that’s an €11 billion savings. read article

Alphaville voices some more concerns, also regarding the role of national European central banks, which are unlikely to buy into this game.

Meanwhile, it might be time to worry about Iceland and its debt again read article

Planet Money on the somewhat recursive nature of literature on the financial crisis: economist Andrew Lo sat down to bring a stop to the books written on the books written on the books written on the financial crisis 08/09. read article

And more in terms of financial writing: I was pointed to this article in Economist yesterday, rightly mocking poor headlines (oh wait, was that meant for me?) read article

So long.


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