The ECB’s bond swap is done but it looks as if national central banks in Europe won’t get the same deal. According to Reuters, they might not get a deal at all and instead will get the same as private investors.
By forcing losses onto central banks it would reduce the risk of lawsuits but, more importantly, bring Greece’s 10-year future projected debt-to-GDP ratio closer to 120%.
For whatever reason, the Germans are hung up on this 120% even through small changes in growth or tax collection could easily swing the numbers one way or another.
The first problem with central bank writedowns is that Greece’s central bank holds the largest precentage of Greek sovereign debt, by far. The second problem is that it’s a true bailout, rather than a loan, which risks a political backlash.
Reuters reporting that a deal is 50/50 is not a good sign because it implies that there is a rift. Details will leak out over the weekend but the risk of a snag is high enough that euro longs should cover into the weekend.
