James Saft is a Reuters columnist. The opinions expressed are his own.
Greece cannot be saved without debt relief, and debt relief for Greece may mean what amounts to a mass Jubilee with debt write-offs and recapitalizations needed for weak banks and nations across the euro zone.
Little wonder that officials delay, deny and only belatedly try to negotiate openly with reality.
Greece’s credit rating was downgraded by Standard & Poor’s to B on Monday, taking it two steps further into junk territory, just days after a secret meeting of euro zone finance ministers gave rise to rumors that the country would soon leave the common currency zone.
EU officials have said a new aid package for Greece (and Ireland) is on the way, and S&P foresees commercial creditors paying their share too, which even if it is only an extension of the maturity of the bonds is tantamount to a default.
“Although an extension of maturities with no principal discount would likely imply a recovery greater than 50 percent, our projections suggest that principal reductions of 50 percent or more could eventually be required to restore Greece’s debt burden to a sustainable level, given trend growth potential of the Greek economy,” S&P said in explaining its action.