Chancellor Angela Merkel of Germany retreated Friday from demands that private financial institutions be pressured to participate in efforts to rescue the Greek economy, a compromise that seemed to offer some breathing space in Europe’s efforts to confront its potentially ruinous debt crisis.
Her critics in the European Central Bank and in many European capitals had argued that any requirement that private investors absorb some losses risked plunging Greece into a disorderly default on its enormous debt.
But after a two-hour meeting with President Nicolas Sarkozy of France, whose banks are among the most heavily exposed in the Greek debt crisis, Mrs. Merkel relented, saying, “We would like to have a participation of private creditors on a voluntary basis.” She acknowledged, too, that there was no legal way of forcing banks to participate.
“This should be worked out jointly with the E.C.B,” she added, referring to the European Central Bank. “There shouldn’t be any dispute with the E.C.B. on this.”
In other words - suck it up, Greeks. The banksters are going to get 100 cents on their dollar, and you can fuck yourselves. Enjoy the austerity!
It's pretty funny, because any finance or investment academic curriculum will thump its chest proudly at the efficiency of the free market, and how it works because investors price risk and allocate it accordingly to their risk tolerance, their desire for returns, etc. It just works!
Except when it comes to public debt, that's just never how it works. The investors are never forced to take a haircut, because we have to instill confidence in stuff and things or the free market Jesus will punish us, and the public is always forced to socialize the private losses through draconian budget cuts and austerity measures.
But don't worry Greece, I'm sure the banksters will have your back after you help them out of this crisis. They were certainly most philanthropic in the United States following the 2008 bailouts.
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