Cantillon: Some way to go yet in Greek saga

The drama in Athens continues. The latest protagonist into the fray is Lazard, the storied investment bank which was recruited at the weekend by Alexis Tsipras’s radical left-wing government to advise on its campaign for a big debt writedown.

Lazard has form in this department, having advised the socialist Pasok party when the government it led negotiated with private bondholders in 2011 and 2012.

Talks back then led to a restructuring deal, but there is little appetite in the euro zone to go down the same road again, not least because most of the Greek national debt is now held by other euro zone member states.

There is some way to go yet in the saga, though it is as well to note that Pasok itself found itself deposed from office after the previous debt restructuring.

Like other stricken countries, Greece has had a mixed time of it in dealings with investment banks. Goldman Sachs infamously executed cross-currency derivatives for Athens in 2001, thereby reducing Greek foreign-denominated liabilities. This did little for the country’s credibility afterwards when full-blown crisis blew up in 2010, although Goldman defended the practice as a legitimate exercise in line with statistical rules then in force.

The presence of an investment banker or two might well provide reassurance to political leaders at a time of crisis, but it would be wrong to assume omniscience, no matter how large the fee.

In 2008, remember, Merrill Lynch were all for the Irish banking guarantee.