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Comment by tomp | Hacker News Reader

One has to admit, EU politicians (and their financial advisors), are cunningly smart... First, they force Greece to default, now they force Cypriot banks to default, but they never actually call it default, so the reaction of the financial markets is quite tame.

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After seeing the results in Greece, and after they admitted that austerity failed, how can they do the same with other countries? I fail to understand the thinking that leads to this.

What austerity are you talking about? The governments still spend much more money than they have. When you have no money, taking a loan to buy a 60" plasma TV instead of an 80" one does not mean austerity.

Yes and no. Governments are spending in bank bailouts, but there's austerity for the masses, like tax hikes and cuts in social spending.

Which country are you talking about? Nobody I know buys TVs any more, let alone with loans. Or are you saying the government buys TVs?

Sounds like a nice anecdote, it would be good if it corresponded with reality at all.

Where's the default? I don't read anywhere that Cyprus is defaulting in part of its debt.

EDIT: Why the downvote? Please explain what percentage of the debt is being defaulted, that is, what is the percentage of Cyprus debt that isn't going to be paid at all?

Having the dept repaid by stealing deposited money, is close enough to default in my books.

Especially if that only repays a tiny amount.

Same thing with Greece. The dept is always the same as it was, and the default is only avoided by getting a quick additional loan every X months. Which is essentially a default in "life support".

That's not a default, it's a new loan. Answer this question: What percentage of Cyprus debt has been defaulted? That is, what percentage isn't going to be paid at all?

>That's not a default, it's a new loan.

A new loan that can never be repaid, and its only purpose is to prevent an immediate default, it just as good as a default in my books.

Maybe not from the point of view of the creditors (they will get some of their money back), but still having very similar consequences to the debtors: difficulty in loaning new money, financial destruction, a take-over-of-control by the creditors' intermediaries and the liquifying any valuable state assets.

It already started with indiscriminately stealing 6% from the bank account holders and can only go downhill.

>That is, what percentage isn't going to be paid at all?

Lots of it. Following the same process as with Greece et al, there is definitely going to be a "haircut".

> A new loan that can never be repaid, and its only purpose is to prevent an immediate default, it just as good as a default in my books.

That's quite a stretch of the term "default". A default is when a debtor declares that he can't pay and therefore he won't pay. Getting into a new loan doesn't qualify as default.

> Maybe not from the point of view of the creditors (they will get some of their money back), but still having very similar consequences to the debtors: difficulty in loaning new money, financial destruction, a take-over-of-control by the creditors' intermediaries and the liquifying any valuable state assets.

With a real default, there would be less financial destruction. At least the bleed of paying the loans would stop.

> It already started with indiscriminately stealing 6% from the bank account holders and can only go downhill.

Agreed.

> > That is, what percentage isn't going to be paid at all?

> Lots of it. Following the same process as with Greece et al, there is definitely going to be a "haircut".

Then it will be a (partial) default on the new loans, but it isn't yet.

Banks are defaulting on 10% of their obligations to accountholders. Money went in, didn't come out.

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