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A Greek Catch-22

Levy-Yeyati, Eduardo, (2011), ‘A Greek Catch-22‘, www.project-syndicate.org, 27 July.

Desperate times bring desperate measures. The latest package to cope with Greece’s insolvency offers a bond buyback to lighten the country’s debt burden. In essence, this is a back-door debt restructuring: Europe’s bailout fund, the European Financial Stability Facility (EFSF) would lend the money for Greece to buy back its own debt in the secondary market at deep discounts, thereby imposing a loss on private bondholders without the need to declare a default.