Will Greece issue AAA bonds? This is a possibility discussed now. Greek bonds may carry a European Investment Bank guarantee, possibly giving it the perfect rating. With rich countries directly guaranteeing Greek bonds, there is no other way to look at it but as a TransferUnion that Germans are wary of.
The current schemes for Greece, Portugal and Ireland is to throw money on them, until they balance, grow, get back on their feet and get back to the bond markets.
Now they won’t need to.
The bonds are guaranteed under this new idea.
This new proposal will allow it to get back to the markets – with guarantees from the rich countries. And what happens if Greece can’t pay? Well, the guarantees make sure that someone will pay.
This means that Germany and other countries transfer the money that they saved to Greece. Will we see big demonstrations in Germany against it? I doubt it.
In the meantime, EUR/USD rallies. Once again, avoiding the inevitable Greek default is good news for the common currency. Will this solve the problem? Probably not.
Further reading: Greece’s Biggest Creditors Ready For Restructuring
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