European leaders, the ECB, the Commission, the heads of States had
proclaimed it loud and clear : The Greek debt
restructuration will remain an exception, the first and only of its kind; no
other country shall benefit from such largesse. Their goal was to avoid contagion,
because if every country experiencing difficulties were to ask for a debt
restructuration (which entails a net loss for investors), the whole trust in
the Eurozone would stand on shaky grounds.
Nevertheless, away from the cameras, without invoking a « last
chance summit », another country just benefited from a restructuration,
namely Ireland. Wondering why the mainstream media kept quiet about it ? Well, actually, that was the goal. True, things were
made easier, because the ECB was the sole payer; no private investors, who
would have been more vocal, were involved.
Ireland has benefited from 85 billion
euros for the bailout of its banks in 2009. But, last December, the governor
of Ireland’s central bank had clearly let it be known that it could not meet
requirements. He said, in an « all-or-nothing » tone, ‘The
reimbursement time span should be considerably expanded’.
So the European central bank (ECB) was stuck with accepting (on Feb.
7) an extension of the mean terms (from 7 to 34 years) and a lowering of the
interest rates. Thus, the ECB is forfeiting 20 billion euros in interest
rates over ten years... which is quite a gift, considering that, with Greece,
it had forfeited 8 billion euros in interest rates. The first payment on the
principal will be made in 2038, and the last one in 2053, which will leave
ample time for more « discussions ». Well played, Dublin !
Since Ireland was planning to come back to the markets before the end
of this year, it had to avoid any psycho-drama. Sure, the country has made
some real efforts that are starting to pay off, exports are on the rise, the expected growth for 2013 is 1.3%, which is not so bad.
But the real estate bubble crisis hasn’t been solved yet, and delinquent
mortgages are parked with the Bad Bank NAMA (National Asset Management
Agency), funded by the State. There are still risks.
We understand the need to keep this accord out of the public eye in
order to keep investors focused on European sovereign debts. But Portugal is
already knocking at the ECB’s door and asking why it could not benefit from
the same arrangements that Greece and Ireland got. And Spain must be
following with interest what its neighbor is doing... Well, it’s not such a scoop anymore !
