European Central Bank Finds Face Saving Way to Allow Greek Default Not to be a Default

Apparently They Just Needed the Right Words

One of the proposals for dealing with the financial crisis in Greece was for the holders of Greek bonds to voluntarily extend the maturities.  That is, when the bonds came due everyone would just pretend they had not come due, and that they were going to come due later.

[Joke Pause:  A man goes to the doctor.  The doctor says he has six months to live.  The man says he cannot pay the doctor.  The doctor gives him another six months to live – Henny Youngman]

Well this so-called soft restructuring was strongly condemned by the ECB as a default, and they were absolutely not going to allow a default.  So now they have come up with the idea that when the bonds come due, the private holders will not get paid, but will see the old bonds replaced by new bonds with, you guessed it, longer maturities. 

Greece goes further into junk territory

So in the end the Greek debt gets extended.

The Dismal Political Economist is just so pleased that the ECB came up with the right words to allow a restructuring of Greek debt without calling it a restructuring.  Clever folks, those semanticists at the ECB.