From the New York Times – The Crisis That Isn’t Going Away:
“It is clear that the debt which will take a haircut is the current debt, not the future debt,” said Willem Buiter, chief economist at Citigroup, who on Friday published an 80-page report explaining why debt restructuring in Greece, Ireland and Spain was inevitable. “All bank and sovereign debt is now at risk — that is the reality.”
Mr. Buiter refers to the latest sell-off as the result of the persistently high level of government debt in Greece and bank debt in Ireland, which prompted Europe and the International Monetary Fund to come up with close to 200 billion euros ($262 billion) to keep these countries from going under.
But with Greece and Ireland now paying out 80 percent of their export revenue toward external debt, governments will find it much harder to justify further squeezing their hard-pressed citizens in order to pay foreign creditors.
In Ireland, pressure is building for holders of senior bank debt to take losses…