Events get stranger in Europe every day. Greek banks now are being forced to participate in the voluntary Greek bond buyback. It seems logical to me that coercion is the opposite of voluntary participation, but what do I know.
The banks own about €31bn of €62bn in the targeted debt, and the buyback requires that €30bn must be repurchased in order for it to reach the necessary milestone to release the rest of the Greek aid tranche next month. Apparently, there are not many other takers.
The already weak banks will lose €4bn in capital, so they are requesting that they be allowed to include future tax credits in their capital computations. Since money losing enterprises do not pay taxes, these credits should not be added to capital because they are worthless.
The banks are also requesting that they be given blanket indemnity from shareholder lawsuits. Even the banks know that selling back this debt is against their interests and their shareholders’ attorneys might have something to say about this in the future.
The whole debt buy back is just a scheme to keep from defaulting as long as possible. It really will not help the Greek people in the long run: