The Greek debt crisis – and other Eurozone country problems

The Greek debt crisis – and other Eurozone country problems

The biggest problem in the Eurozone appears to be the fear of contagion and a lack of confidence.

The solution therefore appears to be a relatively straightforward securitization of the Greek position.

If I concentrate on the Greek position but the reader accepts that this would apply to any National interest, then it would seem logical for all financial instruments held by those outside of Greece to be subject to the same overarching conditions that would:

a) Lend strength to the successor currency; let us call it a drachma and:

b) Underpin the authority of the Greek National Parliament to take appropriate action with regard to their own country and currency’s future.

One of my main concerns would be that those holding Greek debt would maintain that debt in euros thus allowing the drachma to fall into disrepute. That would certainly be a wrong move.

Surely the appropriate action would be to ensure that all financial instruments currently held in euros would be converted to drachma at a given exchange rate on the date that the currency transmogrified.

The legal transfer of all euro debt with a Greek base into drachma would force countries, Germany and France who have a significant interest through their banks in Greece’s debts to have a future interest in the survival and indeed the strength of the drachma. What they would not have is an influence over the Greek government, per se, in the internal dealings of the currency.

Greece would, by this mechanism, be able to improve its competitive status within Europe, probably become a cheap destination for holidays once more, deal with its own austerity programme in its own way and in essence survive or fall by its own efforts.

By securitizing all of the financial instruments that would otherwise cause distress, the third parties who could otherwise divorce themselves from the problem will then continue to share in the problem whilst Greece has the freedom to deal with their own problems in their own way. It is a marked improvement on the prospect of a 60% haircut which, in this proposed situation, will not be necessary, but could be a by product in the short term.

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