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Why Not Default?$
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Jerome Roos

Print publication date: 2019

Print ISBN-13: 9780691180106

Published to Princeton Scholarship Online: May 2019

DOI: 10.23943/princeton/9780691180106.001.0001

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The Socialization of Greece’s Debt

The Socialization of Greece’s Debt

(p.261) Nineteen The Socialization of Greece’s Debt
Why Not Default?

Jerome Roos

Princeton University Press

In March 2012, Greece opened a tender for a voluntary bond exchange in which its private bondholders could swap their securities for a variety of redenominated debt instruments. This chapter discusses the lead-up to and outcome of this debt restructuring, showing how the debt swap was specifically designed to spare the biggest private bondholders—EU banks—while leaving Greek taxpayers and pensioners to foot the bill for the subsequent hit taken by their own banks and pension funds. It shows how the debt restructuring of 2012 led to a radical shift in Greece's debt profile and creditor composition: from bonds held by private EU banks to official-sector loans from the EU member states and the IMF. By the end of private sector involvement, both the adjustment costs for the crisis and the risk of a future default had been fully socialized.

Keywords:   Greek debt crisis, Greece, financial crisis, debt restructuring, bonds

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