France’s plans for involving the private sector in financing Greek bonds and Greek debt has met with the disapproval of ratings agencies which proclaim that they would create a “selective default”. That resurrects Germany’s original plan for involving the private sector. Senior German government officials brought it back to the discussion table on Wednesday.
Under this proposal investors would swap Greek government bonds for new bonds, the very proposal that Merkel gave up on several weeks ago to the praises of the press. The German attitude seems to be that there will be a selective default no matter what, so what?
What the finance ministers should explore is whether one of the 17 countries in the Euro Zone should be allowed to default. That would make trading in the currency and buying European bonds less attractive to investors. The German rating is the highest. They should keep everybody in their union solvent, too.