In this case default = EU sanctioned debt forgiveness,
which, at this point in time, only reinforces the notion that
no one with any fiduciary responsibility should be buying any euro member debt.
This shortens the time frame between now and when things get bad enough for
Germany to permit the ECB to do what it takes to get past the national govt solvency issue.
Germany confirms it is considering more eurozone “orderly defaults”
Berlin/Brussels (DPA) — The German Foreign Ministry on Friday confirmed that Germany was considering the possibility of more eurozone “orderly defaults” beyond that of Greece, as suggested by a paper leaked by the British press.
The Daily Telegraph published a six-page document, attributed to the Foreign Ministry, suggesting that partial bankruptcy must be made possible for all euro members “unable to achieve debt sustainability.”
“There must also be the option of an orderly default (of a struggling euro member) to reduce the burden on taxpayers” in other eurozone members which are paying for its bailout, the document said.
“There is nothing secret about it,” the ministry said Friday, stressing that it contained ideas on which Foreign Minister Guido Westerwelle had already publicly commented upon.
At the start of the euro debt crisis, EU leaders maintained that no country would ever fail to pay back debts. This year the taboo was broken with Greece, as private lenders were ordered to take a 21 per cent hair cut on Greek bonds. The figure was then raised to 50 per cent.
The memo proposed that “orderly default” procedures should be governed by the European Stability Mechanism, the new euro rescue fund which, under current plans, is due to enter into operation in 2013.
The paper also backed strong EU interference in the economic affairs of eurozone budget sinners, proposing that a country not meeting austerity targets could “have concrete budgetary measures imposed upon it,” such as “specific spending cuts” or new taxes.
But commenting on Dutch proposals to create an EU commissioner with direct powers of intervention in national budgetary policies, it warned that “the constitutional provisions on the budgetary autonomy of the Bundestag (German parliament) must be observed in every case.”
Recalling well-known German positions, the document called for EU treaty changes to implement the budget discipline reforms it advocated, which also include the possible freezing of EU regional aid and taking budget sinners before the EU Court of Justice.
But it also accepted that such course of action may not be possible.
“In case (an EU treaty change) is not politically feasible, an alternative treaty between the member states that is legitimate under international law ought to be considered,” it said.