That makes the case for Spanish sovereign debt restructuring (not just Portugal) more likely, says Fernandez.
The new Sovereign Debt Restructuring Mechanism (SDRM) will not help Argentina, though.
With the public debt ratio now over 122 percent and investors potentially concerned about the prospects of sovereign debt restructuring taking place if the debt ratio cannot be stabilized, the dramatic reduction in financing requirements over the next decade is helpful.
The concluding statement of the European Council meeting of March 24-25, 2011, addressing the terms under which EU sovereigns may borrow from the European Stability Mechanism (ESM) confirms our previously published expectations that (i) sovereign debt restructuring is a potential pre-condition to borrowing from the ESM, and (ii) senior unsecured government debt will be subordinated to ESM loans.
FORBES: Brazil's Lula Tells Portugal To Reject IMF Bailout As Lisbon Faces Downgrade
And it needs mechanisms for dealing with failure, such as an orderly system for sovereign-debt restructuring.
The ECB's insistence on being excluded from the Greek sovereign-debt restructuring in March, which resulted in bigger losses for private bondholders, has set a worrying precedent.
This case, then, is one of the several moving parts that will help shape the future of sovereign default and debt restructuring.
FORBES: Fed's $2.6T Payments System Risks Paralysis As Judge Orders Argentina To Pay Defaulted Bonds
This is what you get when you half-talk about guaranteeing sovereign debt, and half-talk about private sector burden-sharing, and half-talk about the possibility of restructuring sovereign debt.
That suggests a restructuring of Greek sovereign debt - which would see a formal reduction in the value of that debt - is a more imminent prospect than official pronouncements by eurozone governments and EU officials would suggest.
BBC: Stress-test message to banks: Prepare for possible Greek default - BBC News
These are banks that have holes in their balance sheets, because, thanks to the restructuring of Greek sovereign debt, they can't now expect to get back all of the money that they lent to the government.
Shut out of the international financial markets, the cash-strapped government was forced to seek financial help after Cypriot banks suffered huge losses as a result of the restructuring of Greece's sovereign debt.
They are still nearly 10% up from their low point in June last year, however, reflecting a gradual return in confidence since the second restructuring of the country's sovereign debt and the accompanying recapitalization of its largest banks in February last year.
This latest Greek debt restructuring episode is just like the entire EU sovereign debt crisis it drags on as more meetings are held, and then drags on some more as still more meetings are held.
FORBES: A.M. Kitco Metals Roundup: Comex Gold Firmer Amid Risk-On Investor Mentality Friday
The European Union sovereign debt crisis is still simmering and the focus this week has been on a debt- restructuring deal between the Greek government and the private sector, for which an agreement is reported to be close but is still elusive.
FORBES: A.M. Kitco Metals Roundup: Comex Gold Firmer As Trading Turns Choppy
应用推荐