Greek debt will not be reprofiled because the threats of the ECB are too grave and the stance of Europe’s political leadership too muddled, according to Wolfgang Münchau at the Financial Times.
Summary: The ECB is refusing to budge on its position against a debt restructuring or reprofiling of Greece. It says that if Greece was to have its debt reprofiled, it would not longer allow the country’s banks to utilise the ECB’s refinance operations.
The end result of such an ECB move would, according to Münchau, force the country out of the currency union, and the resulting chaos could end the currency overall.
A much more likely result is that European leaders, who’ve yet to rally around the reprofiling position, step down and extend more aid to the country. The other options are changes in rules around the European Financial Stability Mechanism to issue Brady Bonds or a full on restructuring.
In the end, Münchau says we won’t get a reprofiling, which he calls a “nose job.”