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Greece May Have to Accept Escrow Account for Aid

Posted by: David Tweed on February 13, 2012

Now that the Greek parliament has voted to accept austerity terms necessary to obtain a second EU/IMF bailout, the action moves back to Brussels on Feb. 15, when euro-area finance ministers meet to decide whether to unlock the funds. (Update: The face-to-face meeting was canceled in favor of a phone conference.)

One deciding factor may be the idea proposed by Germany’s Chancellor Angela Merkel and France’s President Nicolas Sarkozy last week in Paris: that the bailout funds are paid into an escrow, or separate, account to guarantee that lenders are repaid.

Jacob Funk Kirkegaard of the Peterson Institute for International Economics in Washington says the proposal could be a game changer for the Greek debt restructuring deal and for Greece’s relationships with the European Commission, the International Monetary Fund and the European Central Bank, known as the Troika.

In this clip, I talk about how setting up an escrow account changes the game:

Under the debt restructuring now being negotiated, holders of Greek debt are being asked to voluntarily swap their existing obligations for new bonds worth about 70 percent less.

Kirkegaard speculates that bailout funds paid into the escrow account would only be available to make interest payments on the new bonds, not the old ones, therefore providing “a powerful incentive to secure a higher participation rate among creditors” in the bond-swap program.

If sufficient money is held in the account, the bond holders would then be assured by the euro area of getting their interest payments, removing the threat of default on the new bonds.

That would change the dynamic between Greece and the Troika. Until now, Greek governments have bet that the Troika has no choice but to pay the next loan tranche, knowing that the risk of contagion from an unstructured Greek default would devastate the entire euro region.

But with an escrow account, if there were Greek resistance to reform, the Troika would be able to use the account to keep holders of Greek bonds happy while keeping back new funds from the Greek government.

The question is, will the Greeks agree to this arrangement? I suspect they have little choice.

Meanwhile, even with an escrow account in place, some analysts say the ECB must erect an even higher firewall to contain the ill effects of Greece’s financial woes. Here’s Kevin Doran, senior fund manager at private bank Brown Shipley & Co. discussing his take on the magnitude of the challenge:

Reader Comments


February 27, 2012 11:39 PM


March 11, 2012 7:01 AM

There was a time when the King of the Cosmos was a colorful personality, larger than life. Perhaps his fame had something to do with a jaunt in the sky that temporarily left Earth with no stars, or maybe people just loved his absurd overreliance on the royal "we." Whatever the case, the peculiarly clothed king was anything but forgettable. According to Touch My Katamari's story, game enthusiasts have changed in the years that have passed since Katamari Damacy arrived on the PlayStation 2. Many of them no longer look at the series or its monarch as anything particularly special. In a horrifying twist, one father can't even decide for his son whether the enormous monarch is more amazing than the boy's school principal.
Touch My Katamari begins with the horrified king eavesdropping on that fateful conversation. Depressed by the realization that people no longer adore him, the king decides to stage a comeback. He turns to his son for assistance. As a miniature prince in a green jumpsuit, you roll a sticky ball around the world. You gather tiny objects, animals, people, and eventually buildings as your katamari grows to a suitable size and then is turned into a sparkling star by your eccentric but powerful father. That's the only way the proper order of the universe can be restored.
The lighthearted plot is a return to form for a franchise that definitely needed it. The main story strand is joined by a secondary thread that tells the tale of a slacker named Goro who has a test coming up but can't seem to pull himself away from the lure of otaku. Goro's adventures unfold in exaggerated cutscenes that feature a surprising amount of action, given their subject matter. Meanwhile, the king's trials consist of humorous conversations that you have with him and his subjects between stages. You'll likely find yourself looking forward to each new scene before you get back to rolling a ball around to collect more junk.
Touch My Katamari contains only 12 environments, each with only one default assignment. Eight levels direct you to gather rubbish indiscriminately. Objectives in the other four stages provide twists on the standard mandate. In one case, for instance, you need to collect as much food as possible without exceeding a calorie count (easier said than done, since guessing at potential fat intake is difficult unless you stick to collecting only fruits and vegetables). In another scenario, you can play until you roll over either a bear or a cow, with the goal being to collect the largest possible specimen of either species. The alternative objectives make things interesting, but the limited number of unique stages hurts. Skilled players can probably work through the game in three or four hours, and then they're left with nothing to do but unlock content.
Fortunately, there are plenty of reasons to keep playing even after you beat every stage and see the closing credits. Each stage contains several hidden objects known as curios, and a missing royal cousin is lurking somewhere in each environment. The more trinkets and characters you find, the greater your rewards if you manage to complete the stage. The King of the Cosmos rates you on a 1-to-100 scale, and one of his lackeys awards you candy based on your performance. That candy serves as currency that you can then spend in the various shops.
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Financial markets are on the edge as investors await a solution to the European debt crisis. This blog examines the banks that hold billions of euros worth of Greek, Italian, and other sovereign debt; the governments that must pay off or refinance that debt; and the implications for the worldwide financial system if they can't.

Analyses or commentary in this blog are the views of the author and or commentators, and do not necessarily reflect the views of Bloomberg News.

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