May 18th, 2011
04:47 PM GMT
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The Greek debt crisis may be giving eurozone finance ministers plenty to talk about in Brussels this week, but their careful choice of words has led to a veritable boom for the economic vernacular.

We have 2007 to thank for the terms ‘sub prime’ and ‘credit crunch,’ now 2011 has given us a new lexicon. It includes words like ‘soft’ and ‘hard’ restructurings and ‘brutal austerity.’

Economic novices may think they are alone in finding this new jargon opaque and perhaps intimidating. Fear not.

After ten years in this field I confess it’s (almost) ‘all Greek to me’ as well.

Here’s a snapshot of the more obscure terms grabbing the business headlines these days. Feel free to vote for your favourite.

Haircut: No, we’re not talking European Central Bank head Jean-Claude Trichet’s famous ‘short back and sides’. The ‘haircut’ investors have been discussing these days refers to a discount applied to the face value of Greek bonds to account for their lower market value.

Reprofiling: Quite distinct from UK opposition leader Ed Miliband’s reported nose op this year. This would involve extending maturities on Greece’s debt, without altering their interest rate. As of last night this appeared to be an option Brussels would consider for Greece as part of a package that also includes stepped-up privatizations and deeper spending cuts.

Restructuring: Comes in various sizes, shapes and textures. With a debt burden equal to 143 percent of GDP and investors demanding yields of more than 20 percent to hold its bonds, economists generally agree that some sort of restructuring is needed to stave off a ‘Greek tragedy.’ But it’s the severity of the action that is now in question. Eurogroup head Jean-Claude Juncker has dismissed a ‘large’ restructuring but he hasn’t ruled out a ‘soft’ one (see: ‘reprofiling’ above).

Junk:  For nearly a year Greece’s sovereign debt has languished on the lower runs of the credit worthiness scale. This means that although the yields on Greek bonds are high, they are not considered ‘investment grade’ and are only recommended for speculative investors.

Humour aside, Greece’s crisis is far from funny because it threatens to undermine the stability of the other nations sharing the euro.

Already Ireland and Portugal have had to receive bailouts because they couldn’t service their spiralling debt costs. Fears of contagion to other indebted nations have the bond markets eyeing Spain cautiously.  

Yet, Greece’s predicament looks more stark if you let the numbers-rather than the words-speak for themselves.

Greece must repay $20 billion in June this year. For 2012 and 2013 there’s already a $92 billion shortfall, which means the country may well be wishing the ‘buck stops here’, cause boy will it need it.

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soundoff (9 Responses)
  1. Gr M

    scary

    May 18, 2011 at 6:50 pm |
  2. deepwater805

    My (2nd) Big Fat Greek Bailout...

    May 19, 2011 at 2:38 am |
  3. SyracuseNZ

    When the World is all about money, what do we expect is going to happen?

    I bet the UK are glad they didn't switch to Euros!

    May 19, 2011 at 4:11 am |
  4. Antje Hage

    It is a peek into the future of USA. Which is in as much debt as Greece is. USA has more bluff and indeed has a much better productivity which still manages to lure buyers of bund. See how the main buyer, China, is going to like a dollar downfall. All of sudden half of their investment gone. They are not going to be amused or remain friendly.

    May 19, 2011 at 8:42 am |
  5. dorveK

    Another fun factoid: in French, "IMF" (French: "FMI") rimes with "$odomy"...

    May 19, 2011 at 12:12 pm |
  6. kac

    China will never lose money on U.S. bonds. When our credit rating decreases they will simply get more interest and more interest and more until finally the developing world has turned the tables. And they are lending us money and receiving twice as much back in interest payments. well that is what I like to think in my more euphoric, Utopian states.

    May 19, 2011 at 6:38 pm |
  7. Frank Liberty

    Greece is a lucky country, Europe always backs and takes care of them like a child. Greeks siesta, Germans pay.

    May 20, 2011 at 2:11 am |
  8. Pantelis

    The above comment is not accurate. It is the Spanish that siesta. Greeks do not have a institutionalized concept of an afternoon nap like the Spanish. The germans pay nontheless of course, but only because the Greeks are very good customers when it comes to buying their submarines and defence products, as well as their cars and consumer products. (Biggest Porsche Cayenne customers are Greeks).

    May 20, 2011 at 9:00 am |
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