They would be in effect robbed by the senior

With a stock of debt of 150 of the GDP this year and 160 in 2012, the Greece is considered insolvent. The ratio of the Ireland peak at 120 in 2013, which also leaves little doubt about the "sustainability" of Irish public debt and no doubt if it integrates debt from banks. The case of the Portugal, whose debt should approach 100 this year, is less clear. For after Patrick Artus, at Natixis, to stabilize the levels of debt, should be the primary surplus is greater than 13 points of GDP in Greece, 7 points in Ireland and 6 points for the Portugal, taking account of the recent market rate (respectively 12.5, 10 and 8). What is impossible. Short of an economic miracle, reduce the debt thus appears to be a solution. Because if the stock of debt of the peripheral countries is not decreasing, their return on the financial markets is compromised (the Greece no believes already more for 2012). The investors are still reluctant to buy these bonds. Funders - including the other Member States - they will not indefinitely want to put hand to the wallet.

There is a risk of provoking a new crisis, the damage that will suffer the creditors of the peripheral countries, namely, banks and insurers, Governments providing assistance and the European Central Bank (ECB), which bought 77 billion of securities. "The problem in assessing the risk of a restructuring, it is that is has no precedent in the euro area.". "The main argument against such a scenario is that it is difficult to anticipate the magnitude of the systemic shock resulting, through the balance sheet of banks," said Eric Chaney, Chief Economist of AXA. "If the time should be used to something it is to recapitalize financial institutions, so that they are just better armed to absorb the losses on the debt." In the case of the Ireland, a restructuring of the senior debt of the banks rather than the State would seem less risky. "It is likely that you arrive here sooner or later," judge Eric Chaney.

The effects (and victims) of restructuring also depend on the time it occurs. We must distinguish the forward and after 2013, the date on which the stability mechanism European (MSS) comes into force, with a status of "priority" creditor This date also corresponds to the integration of provisions for restructuring ("CAC") in newly issued securities. "If a restructuring takes place before 2013, States, i.e. the taxpayers, would be in the front line: because in theory, the Greece lending would be treated the same way as those of other creditors", argues Eric Chaney. "After 2013, it is estimated that half of the debt of the Greece will consist of loans granted by the IMF and the countries of the euro area which will have a"senior"status, which means that if the adjustment is 50 - which would reduce the stock of debt to a more sustainable level - ordinary creditors would suffer losses much higher than the 30 to 40 now anticipated." They would be in effect robbed by the "senior". A note from Morgan Stanley, however States that even the "senior" creditors, can wipe losses if their exposure to the debt of the country concerned exceeds the amount of debt that will be eventually repaid. They will therefore interest to push for a restructuring recovery expectancy falls.

There are various forms of restructuring. Many believe it still to reduce rates of loans to the Greece (and apply the same logic with the Ireland). Today, lenders lend to the Greece by him charging their own cost of funding more premium. This premium may be reduced, or even delete this, possibly retroactively, if the country has made sufficient efforts. Morgan Stanley team suggests to abandon this bonus and points out the inconsistency between the status of the MSO and the fact that he imposed a surcharge to the Greece. "But align financing costs of the peripheral States to those of the funders, rated AAA, would amount to a form of tax transfer in the euro area, which would be politically explosive and is prohibited by the Treaty," reacts Eric Chaney. "It must instead consider an intermediate solution, which is not a transfer or a prohibitive loans granting... even if, in the end, this is not sufficient to solve the problem of the Greece."

Also travel scenarios based on an exchange of debt. Especially in the form of "Brady bonds": titles would be resumed with a haircut bonds guaranteed by a third party be noted. "We can also imagine an exchange of debt against real assets, suggested the Economist for AXA.". But for a country like the Greece, it is difficult to find real assets. "For the Ireland, the Governor of the Central Bank raised the possibility of issuing GDP-indexed bonds.