When the Greek government originally borrowed their debts, they did so mostly from commercial banks in other EU countries. Therefore, the first Greek crisis was systemically dangerous. It had the potential of dragging the entire EU banking system into the mud. In the meanwhile, these commercial EU banks have been able to offload their Greek debt paper onto their own governments and onto supranational EU organizations. Today, a Greek default would no longer put the EU banking system in jeopardy. It is the European Financial Stability Facility (EFSF) and similar organizations at national and international level that would see a hole appearing in their financial paperwork, if Greece defaulted.
Therefore, the point of view of Alexis Tsipras, the Greek prime minister, makes a lot of sense. Let Greece simply default and let the current debt holders dump the Greek paper on the open market, where it will trade at cents to the Euro. Inasmuch as Greece finds more money in the future, the Greek government can try to buy back debt paper in order to destroy it. The current holders of Greek paper would indeed lose money but in fact they have lost that money already. If they simply had the courage to let the open market value their holdings, they would see today already that most of the value has already gone. Nobody has any hope of seeing the money back represented by the Greek debt paper. Why not just admit it?
Historical lesson: Borrowing large amounts from EU banks is a one-way bet. Their governments will not let these banks go bankrupt and therefore, if need be, they will take over the debt. Since these governments cannot collect the debt either, they will eventually have to forgive the debt.
Therefore, the point of view of Alexis Tsipras, the Greek prime minister, makes a lot of sense. Let Greece simply default and let the current debt holders dump the Greek paper on the open market, where it will trade at cents to the Euro. Inasmuch as Greece finds more money in the future, the Greek government can try to buy back debt paper in order to destroy it. The current holders of Greek paper would indeed lose money but in fact they have lost that money already. If they simply had the courage to let the open market value their holdings, they would see today already that most of the value has already gone. Nobody has any hope of seeing the money back represented by the Greek debt paper. Why not just admit it?
Historical lesson: Borrowing large amounts from EU banks is a one-way bet. Their governments will not let these banks go bankrupt and therefore, if need be, they will take over the debt. Since these governments cannot collect the debt either, they will eventually have to forgive the debt.