主题：【原创】欧元区救助计划的一些技术细节 -- 我爱莫扎特

Investors who bought insurance against a possible Greek default are sweating right now.

It appears that the “voluntary” 50% haircut on the value of outstanding Greek debt is being structured in such a way as not to trigger CDS protection. The committee that decides is meeting to discuss whether or not the terms of its conditions for a payout have been triggered.

My colleague Matt Phillips, writing a post for MarketBeat on wsj.com Thursday, didn’t hold out much hope for the contracts to be triggered.

If the CDS are not triggered it will add insult to injury to those who bought protection. That’s because, as an insurance contract struck between banks, the CDS usually last over certain long periods, say five years of premium payments for five years of protection. Anyone buying CDS on Greek debt earlier this year will then be on the hook for another four years of payments.

Now, all other things being equal, that might not be a total catastrophe, say people who deal with these contracts. That’s because banks use CDS as a balance-sheet hedge to offset writedowns they take on sovereign debt.

This, though, presumes those CDS contracts retain their value—say because the next time Greece defaults it won’t be “voluntary.”

This seems unlikely.

As Citigroup’s uber-economist Willem Buiter notes, the Greek default passes the duck test.

It looks like a default, sounds like a default and lays eggs. The writedowns would be “voluntary” only in the sense you “voluntarily” hand your wallet over to the guy holding a gun to your head.

Indeed, the ratings agency Fitch said Friday it would treat the Greek plan as a default.

So if these CDS fail to trigger because of political shenanigans and legalese, it raises the question of why anyone would ever want to hold CDS on sovereign debt anyway.

What this does is make it painfully clear what a nonsense CDS—essentially insurance policies against bond defaults—are in the context of developed-market debt, as the Macro Man bloggers point out.

In countries with their own printing presses, like the U.S., the U.K. and Japan, it is very hard to see how a default is possible. True central banks can refuse to buy government debt, but central bankers can always—always—be replaced by politicians.

But now we know even countries that do not have control of their own monetary policy will not be allowed to default in a legalistic sense of the word. The question now must be whether people who bought CDS protection on Greek debt will continue having to pay the premiums on this protection even though they know they’ve been stitched up.

But if CDS on developed-market debt are found to be worthless, then all those balance-sheet hedges—Buiter estimates some $74 billion gross outstanding on Greek debt alone—suddenly become worthless.

Which means banks will have yet new holes to fill in their capital.

That, though, isn’t the end of it.

If insurance written by market participants for market participants is invalidated by sovereigns, what is the value of insurance contracts being offered by the sovereigns themselves?

Here I’m referring to the European Financial Stability Facility, which is now being touted as a super insurer of European sovereign debt (albeit maybe only the first 20%). Once again, Buiter makes a critical point: not allowing existing CDS to trigger reduces the credibility of the EFSF protection.

I’d go even further. The whole euro exercise has raised serious credibility issues. Governments used all sorts of accounting fudges, off-balance-sheet accounting and derivatives to meet single-currency membership criteria that had already been stretched to breaking point. Greece consistently misled on the state of its finances.

France and Germany broke the Maastricht treaty obligation to keep their budget deficits below 3% of GDP even before the 2008 financial crisis.

The latest maneuverings just confirm that Eurocrats make used-car salesmen look like the apotheosis of probity, prudence and honesty.