A plan has been put forward, which the authors say can solve the financial problems of the Euro-zone but it will require austerity, solidarity and creativity.
The Eureca Project – Hellenic Recovery Fund is being touted as ‘a solution for Greece and Europe’ by its creators Roland Berger the strategy consultants and has been doing the rounds for a couple of days.
The strategy document points out that current CDS spreads put the possibility of Greece not defaulting in the next five years as just about zero. And that if Greece is forced into a fire sale of assets then their value would plummet.
What the project suggests is that all Greek assets, which are valued at â‚¬125 billion, be put into a holding trust company, then the whole thing be sold to the European Union for that â‚¬125 billion.
Greece can then repurchase bonds from the European Central Bank and the European Stability Facility so reducing state debt from 145% of GDP to 88%. Also cutting the ECB’s and taxpayers’ exposure to Greek debt to zero in the process.
As a side effect of the plan the authors say that CDS spreads will collapse so hitting the speculators and protecting Ireland, Portugal and Spain.
Another side effect would be the total privatisation of the Greek public sector, which would ‘stamp out corruption’ (since when has the private sector been so squeaky clean?) and promote long term growth.
And any Greek banks holding Greek bonds would see their value go up by some â‚¬30 billion, reducing risk and enabling credit to flow again.
But this plan is very politically risky. Would any political party in any country survive the total privatisation of their services, especially if it involved healthcare. It could also require the re-writing of many EU and bi-lateral agreements.
I'm not sure anyone will be jumping out of the bath shouting 'Eureca' over this particular proposal.