“I was also investment banker at that time . . . the technology behind this was to create a source which would trawl information from all available open sources on internet.”

Anna Chapman, alleged Russian spy, from videotaped interview at New York entrepreneurs’ conference.

Clearly, Ms Chapman’s alleged employer should have listened to her comments on open source information. For example, consider the cost of sending lawyers and consultants – you could call them spies – to hang around Brussels and Frankfurt to assess the risk of a Greek default.

Yet simply by looking “on internet”, you could find out that Greece has already started to restructure its state debts. Look at the site for the Hellenic Association of Pharmaceutical Companies (www.sfee.gr), and you will find a link to a joint press release by the Greek Ministry of Health and Social Welfare and the Ministry of Finance. On June 9, unnoticed by most in the financial world, they stated: “The [Greek state hospital system] debts of 2007, 2008, 2009 amounting to €5.36bn [£4.4bn, $6.7bn] will be settled with zero coupon bonds.” The hospital debts lingering from 2007 will be paid with two-year zeros, 2008 with three-year zeros, and 2009 with four-year zeros.

There is some, actually a lot, of detail missing from the one page release, which presumably will be filled in by the legislation that will be introduced, and probably passed, to implement the restructuring. The release does say: “It is certain that the banks co-operating with the suppliers will show interest in prepaying these bonds, transforming the corporate risk undertaken on behalf of their customers – hospital suppliers – in credit risk against the Greek state, in the form of a bond which can be financed through ECB.” And, according to the release: “In case suppliers settle these bonds by January 2, 2011 . . . the above ‘discounts’ corresponds to a total percentage of about 19 per cent.”

Get that? That 19 per cent haircut is based on the Greek state’s own calculation of the present value of these obligations of its hospital system. Others would probably use a higher discount rate. This kind of reduction in principal value, which paid for a critical import, is not, I believe, incorporated in the much touted “stress test” for European banks. The bank regulators and the European Central Bank seem to think any more than a small haircut in euro area state debt would be just too politically sensitive to consider. Yet here is the Greek state telling you their old paper isn’t worth what it was when they incurred the obligation.

Even before the new bonds are issued, some of the hospital debts are already said to be trading around Athens, supposedly at much lower prices than the release suggests would be appropriate.

And while the release says the debts “will be settled”, major suppliers have not yet agreed to the hospital debt bloodletting. According to a London dealer in edgier emerging market paper, some of the suppliers have already been around to get a bid. Unsuccessfully, sad to say, even though the suppliers’ banks have that promise of “ECB” repo availability. He sniffs: “You won’t get a bid at 50 [per cent of face]. My guessing is that it is more like 30. We were appalled at the very low quality of the documentation.”

As you see, we are deep into emerging market frontier-land, even though EU citizens can walk through the fast track at Greek customs and immigration. Before emerging market trade claims would wind up at that London dealer, they would be presented to an even edgier specialist, the sort who is familiar with central African landing strips and Cypriot “spare parts” traders. The one I spoke to a few days ago isn’t interested . . . yet.

“This all happened in the Soviet Union,” he recalls in the flat voice of someone who has seen this before, many times. “It’s too early for us to get involved. Generally the debtors allege waste and fraud in the hospital system, or say the suppliers are blackmailing them. What the pharmas do [when payment stops or slows] is supply only the basics like penicillin or insulin. At the end they stop doing even that. If you are an exporter you are not prepared to sit on an old debt; you sell it, since the accountants will require provisioning.”

Eventually, though, the bills get paid. The trade creditors will lose the initial discount and the realistic value of their waiting time. Some of that is captured by the dealers or specialists who don’t mind sitting on hard plastic chairs in hot, unpleasant, waiting rooms. The suppliers then attempt to catch up through their pricing on future sales.

Since the hospital debts do not yet have the artificial support of ECB market operations, perhaps any indicated bid side for this paper should be considered as a useful data point. That is, the price people would pay for what will soon be Greek state bonds, if they were investing their own money.


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