Greece’s austerity package has been approved, and the EU says it will release the next bailout tranche. We get this far only to be told the future of Greece’s rollover plan rests on whether S&P says the bond rollover plan triggers its selective default criteria? How ridiculous. How on earth has S&P managed to focus the entire debate around its internal guidelines? Bond, stock and currency markets were jittery into the Asia open and the European morning session, all citing the SD possibility.
Why the hell should anyone care what S&P says or does to this extent? Its sovereign rating for Greece is at CCC- for God’s sake; everyone for whom the rating is material got out of Greek debt ages ago. In fact, the more you think about it, the only people who seem to care are Jean-Claude Trichet and his ECB underlings who reckon they won’t accept securities in default as collateral in ECB liquidity operations. Will the ECB carry through its threat? I wonder.
Keith Mullin, Editor-at-large, IFR
So I say ignore S&P and ignore the ECB on this point; I suspect the latter will come around if the alternative is unleashing another banking crisis. The CDS issue is also a sideshow, so the market shouldn’t worry too much either about whether ISDA’s Determinations Committee declares a credit event; the amount of CDS written against Greek debt is a drop in the bucket against the quantum of debt outstanding.
Sure, the French-inspired re-profiling is a little convoluted and messy round the edges. And it’s only a stop-gap ahead of a more durable solution. But if it gets around mark-to-market and other accounting issues, if banks can avoid capital hits, if it buys Greece more time, isn’t everyone ahead?I’ve argued people give ratings agencies far too much credit. Sometimes, you just have to focus on the bigger issue and ignore the noise.