June 28, 2011
Is the latest incarnation of the Greek sovereign debt restructuring tantamount to a Latin American Brady bond, or is it not?
That was certainly the comparison banded about by European financial institutions in Rome on Monday, when they met for emergency talks on how best to deal with the issue of Greece’s €340bn outstanding debt, a large chunk of which is owned by French and German banks and insurance companies.
But a key element of the Brady plan was the government guarantees of the creditor nations that stood behind it. In the case of Greece, the main creditor governments are insistent that there should be no government guarantee – a point driven home on Monday by Wolfgang Schäuble, the German finance minister.
It is too early to say what will finally emerge as a deal between European financial groups and governments. But there is a growing consensus that the proposal circulated by the French banking sector on Monday was a credible blueprint.
“The French proposals have catalysed the debate,” said Charles Dallara, managing director of the Institute of International Finance, which represents most global banks and helped organise the Rome talks.