Debt Swap

[Coldicote]

We are hearing a lot about Greece and a debt swap, but can someone please explain in simple words what a debt swap is. To me a swap means exchanging something with somebody. What is Greece exchanging for what, and with whom?

[KJN]

Debt Swap

Debt Swap definition :
A set of transactions in which a firm buys a country's dollar bank debt at a discount and swaps this debt with the central bank for local currency that it can use to acquire local equity.

[sunny-dave]

I think basically they are exchanging empty promises for Germany's money ....

[KJN]

As for the Greece Debt swap, they want to swap Greek Euro issued Bonds which have already been issued, (sold to Stockbrokers Insurance Companies ,Pension funds etc.) Lets say for every Euro 100 Bond Issued they want to give in exchange a Bond worth Euro 50 each ) that way they owe only 50 percent of what they first owed, (you may also see it refererred to as a haircut of 50%)

[bazwillrun]

Its defined as keep Greece in the eussr empire building experiment at all costs, its not our money its the peoples and as far as we are concerned thats a bottomless pit, just keep taxing them, because like idiots they just keep on paying

[mike11111]

"eussr". I like it.

[Coldicote]

Interesting thoughts here thank you. Pity ordinary people can't sell their debts - or can they?

[jake-the-peg]

Yep they do all the time

http://en.wikipedia.o...voluntary_arrangement

the principle's the same - you make a bad loan to someone, it's better to get some of it back than none of it all

[youngmafbog]

There are ways of writing down your debt; if you are on your beam ends.

It does however have adverse problems when it comes to borrowing again, no doubt in the same way that Greece will have.

This is not over yet, it is simply the first step. Watch the focus switch to the Irish or Spanish now.

[New Judge]

I think Portugal may be next, youngmafbog. Then Greece (again). And so it will go on until arrogant politicians accept that the Euro in its current form and with its current participants cannot be sustained.

The amusing aspect of this recent development is that knocking your creditors for upwards of 75% of your debt is not officially a "default". I'll remember that next time the Inland Revenue makes me bankrupt !!!

[Coldicote]

Good answers here thank you. Time to sign off now.