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In its most basic form, the plan would be that Portugal would stop paying Irish bondholders and vice versa. Each country would make the former creditors of the
by jessedhillon 8y ago
In its most basic form, the plan would be that Portugal would stop paying Irish bondholders and vice versa. Each country would make the former creditors of the other whole from the payments it no longer makes.
- Lazare 8y agoThat's an interesting idea, however note: 1) There's a reason why an Portuguese pension fund might hold Irish debt rather than Portuguese debt; for example, wanting to hedge and diversify, earn higher returns, or have lower risks. Forcibly swapping the debt gives them an investment they didn't want, and doesn't really "make them whole". 2) It costs just as much to pay back a Portuguese pensioner who owns one of your bonds as an Irish one; this swap does nothing for government finances. Which is why this also is totally not the plan being discussed. The article talks about "The countries can reduce their total debt..."; you're talking about reducing the exchange rate risk of the debt. There's no real overlap here.
- Pamar 8y agoMaybe he is "alluding" at dismantling the Euro?
- tonyedgecombe 8y agoThere isn't even any exchange rate risk as both Ireland and Portugal are in the Euro.
- deleted 8y ago[deleted]
- garmaine 8y agoNope; if a country leaves the euro it suddenly matters which banks’s name is on your debt notes.
- tonyedgecombe 8y agoThat's true although we haven't seen any country leave yet.
- icebraining 8y agoDoes it? Aren't they Euro-denominated anyway?
- garmaine 8y agoNo a Greek-issued euro debt instrument would become a new currency decoupled from the euro with a floating exchange rate if Greece left the euro, for example. That’s what all the hooplah a few years back was about.
- jessedhillon 8y agoYour (1) is a good point. Regarding the rest, there's no exchange rate risk between two euro-zone countries.