With the Greek economy contracting by 7 percent in the third quarter, it is dawning on a few that the country's debt problems can be viewed in economic terms.
The phrase that seems too condescending to repeat -- it's the economy, stupid -- rings loud and clear here. But it seems more worth mentioning this week as Greece reveals a new plan to lower its debt, which is to buy back sovereign debt at a small profit for the bondholders.
This differs clearly from its restructuring effort in March in which bondholders took a so-called "haircut" on their holdings. That was a lose-lose. This would be a win-win buy back program, it's just that the winning would be marginal.
Again, bondholders lose out on future earnings, but this time they would not lose out on the short term cut and run option. So, it would be win-win, but only at a whisper.
Greece is trying to secure an additional $40 billion in international loans and the vicious cycle has financial leaders looking for options. One is for Greece to buy its way out of trouble, a strategy that would allow it to reduce its $434 billion debt load by about $51 billion.
Of course, Greece would have to borrow money to buy back its own debt. The New York Times estimates this would be somewhere in the range of $20 billion.
For once, borrowing seems profitable -- depending on the terms of the loan and depending on the price of the debt it purchases. And the only losses would be the losses on paper. That's debt that would have, could have, or should have been a better investment.
Meanwhile, Greece is struggling to comply with terms of its current financial deals with the European Commission, the European Central Bank and the International Monetary Fund. The last of these, the IMF, expects Greece to hit a debt to gross domestic product ratio of 120 percent by 2020. Currently, the percentage is going the other way, approaching 200 percent. The European Commission, has set its standard at 60 percent.
All this scheming. In the first place, Greece can only use what is called the collective action clause if 75 percent of its bondholders agree to it. So, paradoxically, Greece could be thrust back into the role of scaring its investors -- scaring them into believing this is a better deal.
That might not be so easy, given the billions of dollars of bonds scooped up by hedge funds when Greece restructured its debt in March. This was debt bought at fire sale prices by a professional class of investors who know when they are being swindled. This is not win-win at a whisper for them. This is win-win with a fair amount of grumbling.
It might also be seen as Greece crying "Wolf!" One would think there are only so many times a Greece can scare its investors and get away with it.
In international markets Thursday, the Nikkei 225 index in Japan rose 1.9 percent, while the Shanghai composite index in China gave up 1.22 percent. The Hang Seng index in Hong Kong shed 1.55 percent, while the Sensex in India lost 0.79 percent.
The S&P/ASX 200 in Australia dropped 0.89 percent.
Stocks also fell in Europe. In midday trading in Britain, the FTSE 100 index lost 0.49 percent. The DAX 30 in Germany dropped 0.62 percent. The CAC 40 in France slid 0.31 percent, while the Stoxx Europe 600 fell 0.74 percent.