Europe s Inevitable Haircut

Why Ukraine Deserves a Haircut

I need to have a haircut.

I need to get a haircut.

Initially, to facilitate debt reduction, bondholders would face another haircut.

In these cases, debt restructurings produced a haircut on exchanged bonds.

The size of the haircut tended to be commensurate with the depth of the economic recession before restructuring.

In fact, large depositors are not unlike senior bondholders, and the proposed haircut was a small but welcome step forward.

Forcing bondholders to accept a haircut on what they will be paid also promises to discourage reckless lending to eurozone sovereigns in the future.

There was no institutionalized write down of Latin American debt until five years after the crisis, when a haircut no longer threatened banks stability.

If Greece were forced to restructure its debt and impose a haircut on holders of its bonds, the ECB would incur a sizeable loss.

Louise Brooks (November 14, 1906 August 8, 1985), born Mary Louise Brooks, was an American dancer and actress, noted for popularizing the bobbed haircut.

There would be no write down of principal, or haircut for creditors, only more time for repayment. Banks would be spared having to acknowledge losses.

At this point, the government asked AIG s derivative counterparties to take a voluntary haircut that is, accept a discount on the amount owed to them.

The Paris Club under Trichet provided Poland with a 50 reduction of its debt, on the condition that the country s bank creditors take a similar haircut.

If it is fully protected, as seems likely (the IMF always gets paid in full), then the haircut on private debt rises to an eye popping 90 .

A debt buyback is something of a Catch 22 to succeed in inducing a haircut, it needs to profit from the default fears that it intends to alleviate.

A debt buyback is something of a Catch 22 to succeed in inducing a haircut, it needs to profit from the default fears that it intends to alleviate.

President Nestor Kirchner of Argentina is often portrayed as an anti capitalist radical for proposing a haircut of over 90 on the value of Argentina's defaulted external debt.

A substantial immediate haircut on the sovereign debt of the vulnerable eurozone countries would be so destructive that it would set off a new round of bank panics.

After a bank s shareholders are wiped out and its creditors take an 8 haircut, the European Fund transforms itself into a bailout fund, justifying some of Germany s fears.

But where can it go now to find it? Most of the sovereign debt is now held by the official sector, which traditionally does not allow any haircut.

If the crisis persists, the country automatically enters an impending insolvency procedure, in which help would be available only after a 20 50 haircut for the maturing debt.

The government should have been prepared to place AIG into reorganization under Chapter 11 of the US bankruptcy code and force the derivative parties to take the desired haircut.

Waiting until 2013 to implement these restructurings, as German Chancellor Angela Merkel proposes, will destroy confidence, as it implies a much larger haircut on residual private claims on sovereign borrowers.

As a result, they often see buying trendy shoes or a great haircut rather than giving some money each month to a broker as an investment in their romantic futures.

Will Europeans agree to mutualize part of the cost of the crisis? Greece s creditors (mostly eurozone residents) have already accepted some of the burden by accepting a haircut on their assets.

For the first time in its history, the Fund might have to take a significant haircut on its loans, and it will have to prepare its non European shareholders for it.

The Franco German initiative unveiled at Deauville in early November, which would require some possible measure of restructuring for debt issued after 2013, tried to avoid the immediate shock of a haircut.

By contrast, if the threshold is set low enough to bring spreads down from panic levels, purchases will be more substantive, but at the expense of reducing considerably the effective haircut on private holders.

You have Senator Dodd s Resolution Authority and you enter the decisive meeting determined not to save the troubled bank or, at worst, to save it with a substantial haircut (i.e., losses) for unsecured creditors.

Investors should not worry, they argue, because the current bailout mechanism the European Financial Stability Facility (EFSF) has worked so far without any haircut for bondholders, and will continue to be applied until about 2013.

She has carefully studied not only Jackie Kennedy a comparison obvious from her sheath dresses, boat collars, and page boy haircut but also the triumphs and failures of that other glamorous but underestimated stealth radical, Princess Diana.

After a bank s shareholders are wiped out and its creditors take an 8 haircut, the European Fund transforms itself into a bailout fund, justifying some of Germany s fears. And there is no explicit prohibition of some form of national government bailout.

But, while private sector losses have been minimized, at what price? Had Greece defaulted on its debt in 2010, imposing the same haircut on private creditors as it has imposed now, it would have reduced the debt to GDP ratio to a more manageable 80 .

As the final rate of participation was about 76 per cent (implying that about 62 billion was tendered for exchanges), the second scenario was retained.23 The haircut on discounted bonds was equivalent to 66.3 per cent, which was the highest ever reached in recent times.

The twist to this story is that the head of the Paris Club at the time of the Brady Plan was none other than Jean Claude Trichet, the current president of the ECB. The Paris Club under Trichet provided Poland with a 50 reduction of its debt, on the condition that the country s bank creditors take a similar haircut.