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Greek Fin Min: “Selective Default” frightens for no reason

I don’t like at all what I read and hear, I don’t like at all what Greece Finance Minister Evangelos Venizelos said on Tuesday afternoon. I don’t like it because when a Finance Minister gets the absolute No-No word in his mouth is extremely worrying. He sounds as if he prepares us psychologically. “Selective default frightens for no reason” Venizelos said in a press conference on Tuesday afternoon. “It is not real default, it’s not a credit event” he claimed adding that it refers to bonds appreciation by the three rating agencies.

“If we are calm, wise, and we plan, we can use everything to our advantage. Everything is done to provide a solution.” Venizelos said that there were 36 scenarios about a Greek debt solution… Weird enough Venizelos speaks out this what Prime Minister George Papandreou excludes as solution.

In a dramatic letter to Eurogroup chief Jean Claude Juncker, Papandreou wrote among others: “All these debates-around the new Greek program, private sector involvement, the amount of funding necessary, the talk of ‘selective default’– and the continued cacophony in the media only make the problems in front of us more difficult to solve.” (read the whole letter in Athens News Agency )

So what the good finance minister is telling us? That despite the strict austerity applied to the Greeks, at the end a ‘selective default’ is inevitable.

I was watching the prime time news and some commentators said that in case of selective default some bonds won’t be paid, or that some would undergo a haircut. One scenario spoke of Greece staying away form the markets for a period of let’s say 3 weeks. They also said that the final solution is due end of July or beginning of August.

And on long term that the final solution would include the participation of private sector, loan repayment extension up to 30 years and reduction of interest rates.

From what I understand, we will have austerity, selective default, a second bailout and a repayment extension. What is all these good for?

Read also more on Venizelos interview in Reuters (EN), Proto Thema (GR)

PS. I would appreciate any links explaining ‘selective default’ and its impact on real & everyday life of citizens.

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  1. Well, at least all the pain and suffering fixed nothing. Can you imagine if taking on more debt to pay the interest on your already accrued debts had actually worked?

  2. I don’t understand the difference between selective default and regular default. All I know is that most economists are sure that Greece will eventually default. If a regular default would happen now, I believe it would be best for Greece because it would mean the end of austerity. If it happens later, it allows time for other major players to buy Greece’s assets. Here is a video from Mark Weisbrot on Democracy Now:

    I don’t know about the “selective” default. I am guessing that if this government is pushing for it, it must still mean austerity rules. They seem to be wedded to austerity, unfortunately.

    • Austeriy, as far as I always understood it, is a policy of deficit-cutting, lower spending, and a reduction in the amount of benefits and public services provided. Austerity policies are often used by governments to reduce their deficit spending while sometimes coupled with increases in taxes to pay back creditors to reduce debt.

      Defaulting might get rid of the last part (in effect going bankrupt and using the army to keep the bailiffs out).
      But where do you get the money from to keep on spending, keep on raising your deficit and keep on paying all those who are depended on the State for their income?
      If we not start to live a bit within our means we will be back at this point in history within 10 years after the default…