Thursday, 5 February 2015
Greece and a Country Leaseback Plan.
The ECB yesterday decided not to accept Greek sovereign debt as collateral and the markets went into flight mode. The fight and flight type, not switching off your phone in the aircraft, though that would have been the best thing to do because as we come in this morning the US timezone wobble has all but dissipated. The 100 point drop in Dax futures and dump in Spoos to 2020 has evaporated and Bunds are back to yesterdays range (phew).
The debate over whether the ECB is within its rights to pull back the favour that they granted to the greek junk bond rated collateral is rife, but the upshot is that it’s the Germans fault and that the game book the EU appear to be playing to is the holy book of Dijsselbloem that was read to Cyprus. And like most holy books it starts off very old testament with lots of smitings and punishings and thou shalt nots. I just wish that the EU would jump to the end of the book where they learn that forgiveness, kindness and understanding is to the benefit of all. If not we can just consider the book as the EU’s “Art of War”.
But back to Greece and some more silly thinking. If Greece were a company, by now it would have had advice from an investment bank, the guys in charge would have set up a new company doing the same, drained all the assets from the original company, including the staff and left the old company as a hollow shell loaded with all the debt and no assets against which it’s creditors can claim.
I assume that all the EU rules are stipulated by country and assume that there is no reference to the size that country is, talking geographically. If there was then coastal erosion, volcanic land creation and rising sea levels would be upsetting all sorts of measures. So if there aren’t then perhaps Greece could do the following. A country lease back.
Greece approaches Spain, as they appear to have similar political outlooks towards the EU, and sells nearly all of its land mass and contents to Spain for a token €1, condensing the existing Helenic state to just one small office, perhaps in the centre of Athens or even on an otherwise uninhabited greek island. This office is now Greece and will now have the all outstanding state debt compressed into one filing cabinet with no assets to repay them and no local liabilities to fund..
The deal with Spain is that this new region of Spain (the old Greece) is leased back to its population for maybe €0.50 a year and granted total autonomy from the rest of Spain, much like the type Catalonia is demanding. The net effect is that instead of the whole Greek population having to emigrate to other EU countries due to local economic cataclysm, causing mass demographic problems, instead, rather than moving the people to the country, you have moved the country to the people. As for debt to GDP ratios for Spain, without the greek debt load it may even benefit them.
This leaves the new Greece debt free, still living it’s own way and still within the EU. It can then try and do a Scotland, and be granted complete independence at a later date and (if you were to believe Alex Salmond) be allowed to remain in the EU thus completing the circle.