MAYBE THEY’LL BE TOO BUSY KEEPING UP WITH “DANCING WITH THE STARS” TO NOTICE

2/3/11

European leaders are meeting in Brussels on Friday to consider further approaches to the fiscal and financial contagion that is spreading on the geographic and economic fringes of the eurozone. One of the approaches they will consider has been bandied about for the last few weeks or so: having the European Financial Stability Facility (“EFSF”) lend money to Greece so the Greeks can buy back their government bonds at, as the Wall Street Journal calls it (page A8, Thursday, 2/3/11), “current, depressed prices.”

Okay, maybe I, the EFSF luminaries, or Wall Street Journal reporters were absent for at least a few classes in Econ 101, but I have to ask a question: If it is announced that the EFSF is lending money to Greece to buy its bonds at “current, depressed prices,” how long with those prices remain “depressed”? Won’t potential sellers, knowing that the EFSF is insistent on throwing good money after bad, hold out for higher prices, perhaps even par?

Perhaps a more political, rather than economic, question: Just how will the typical German taxpayer feel about this latest episode of making speculators in Greek debt whole, or better, at the expense of the frugal German?

Just asking.