Absent a complete disclosure of exactly how much debt the Greeks have out there (including the stuff they hid with swaps), I don’t think anyone in the Euro-zone is going to take them up on this deal.
There are two huge rubs in this whole Greek debt issue:
1. The domino situation: while Greece is corrupt as hell, and has been free-spending their way into socialist collapse, they’re only the thin leading edge of a trifecta of similar economic collapse. The Italian situation is by far worse, and Spain is a dead man walking. If the Eurozone countries bail out or backstop Greece, then how are they going to say “no” to the far larger problems of Italy and Spain? And while the Germans and French could easily backstop Greece, they don’t have the money to backstop all three nations.
2. The fact that Greece (and most likely Italy) used financial engineering to deliberately hide their over-spending and indebtedness from the ECB and fellow Euro members, in direct violation of the Maastrict treaty.
At this point, the most likely outcome I see is that the IMF steps in to backstop Greece, and they impose draconian spending controls as a condition of the bailout/backstop.
They had strikes across the country yesterday because of the hinted cuts to come. Presently...barely fifty percent of the public agrees with the measures mentioned. That’s not enough to ensure public support. I forecast this current government will fall within 100 days, and the second by the end of 2010. Loaning them money...does nothing in this case.