Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

Of course, restructuring was an unpopular option with the creditors. As recently as 2007 Greece’s bonds had traded at virtually the same yield as Germany’s. They were widely held. At the end of 2009, of Greece’s 293 billion euros in public debt outstanding, 206 billion were foreign owned, 90 billion were held by European banks and roughly the same amount by pension and insurance funds. For those claims to be written down would relieve the burden on Greece. But it would also tumble Greece out of the club of respectable European borrowers. At an earlier moment in its history PASOK might have turned a national bankruptcy into a liberating rupture.6 By 2009 it was no longer that kind of political party. Restructuring would involve Athens in humiliating negotiations with its creditors. It would most likely involve the IMF. Indeed, restructuring was not just unpopular, it was unspeakable. If you hoped somehow to postpone the inevitable and muddle through, the crucial thing was to preserve confidence. Even mentioning the possibility of restructuring was likely to precipitate a panic, shut off short-term funding and make immediate default inevitable. In due course, however, whatever tactic you adopted, the math was inexorable. Greece’s debts were too heavy and growing ever more so. Restructuring was inescapable. But rather than a clean cut, what transpired was a prolonged and agonizing rearguard action clouded by obfuscation and the endlessly repeated tactic of “extend and pretend.”

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