Sunday, July 31, 2011

In an ideal world, Kafka would restructure Greece

by John Dizard

Financial Times

July 31, 2011

With this comprehensive set of measures, approved at the eurozone summit, we prevented Greece’s sovereign debt crisis from becoming a crisis that could damage the eurozone as a whole, and the euro as a consequence. But we are not naive.François Baroin and Wolfgang Schäuble, FT July 28 2011

The right understanding of any matter and a misunderstanding of the same matter do not wholly exclude each other.
Franz Kafka (1883-1924) – The Trial (Der Process) 1925

Usually, in the hierarchy of proposed stories facing any editor, strong joint statements of principle by continental leaders on the critical issue of the day will be at the top of the list, and new client assignments by law firms would be at the bottom, if anywhere at all. However, in the present Greek crisis, that order should probably be inverted.

Last week, it was announced that Cleary Gottlieb, the New York headquartered international law firm, had been engaged by the Hellenic Republic. I believe this tells us a lot about the direction euro area finance will take.

In an ideal world, Franz Kafka, trained in the law of the Austro-Hungarian Empire, would still be available to work on the Greek government’s restructuring issues. Anyone involved in the country’s workout, or observing it closely, would agree that he would have brought the most appropriate perspective to dealing with European and multilateral institutions. His alleged schizoid disorder would be a feature, not a bug, as we say now.

Instead, the Cleary team working on Greece will be headed by Lee Buchheit, the partner who has previously represented Iceland, Argentina, etc, etc. Trusted by distressed governments, cursed by former optimists with long positions, his is the mobile number of choice for sovereigns that believe they have unsustainable debt burdens.

Mr Buchheit published his strategy on restructuring Greece for the world to read in April of last year, along with his co-author Gaurang Mitu Gulati of Duke Law School, in a professional journal article called “How to Restructure Greek Debt”. People who spend their days cultivating Brussels and Frankfurt insiders should take a look at it.


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