With this construction, the downside to your losses is limited. Depending on how some of the parameters of this agreement evolve, you will probably make a small loss, relative to the par value of your holding. If you are lucky, you might come out positive. You will probably not be lucky. But you will still be better off than if you sold today, or if Greece were to default. More important, the accounting rules allow you to pretend that you are not making any losses at all.If this was any other field of human activity, you would go to jail if you accepted, let alone made such an indecent offer. [emphasis added]This structure is still not quite so complex as some of the more elaborate CDOs we have encountered in the global financial crisis. If you take some time to work through the arrows and boxes, you see relatively quickly that this complex structure is not a private sector participation at all. Rather it is a private sector bail-out.
Münchau concludes: "We are not just 'kicking' any old 'can down the road' any more. This is a can of explosives."
See the article and video at The Financial Times: The Greek rollover pact is like a toxic CDO
(h/t Zero Hedge)
UPDATE: Yves Smith weighs in: Partying on the Edge of the Eurozone Volcano
The Finnish parliament, whose powers reign above those of the government in eurozone crisis resolution management, decided to attach a collateral requirement to all future loans to Greece. The document said that a collateral requirement was not a Finnish wish, but a rare case of a Finnish line drawn in the sand. But given the political situation in Greece, a collateral requirement, as part of which creditors would end up with a sizeable chunk of Greek assets, is hardly acceptable. The snag is that under the rules of the EFSF, any decision to disburse new aid requires unanimous support of all member states. It is possible, technically, for Finland to opt out of the scheme, leaving others to foot its relatively small share of the programme. But official are extremely nervous about this, as this may send a dangerous political signal