The timing of the debt restructuring for one of the three member states of the Eurozone that have resorted to the assistance of the EU and the International Monetary Fund to continue in order to serve their debt obligations, could results into serious economic consequences, that can cost even the existence of the Eurozone. This is the view that is being analysed in a front page article that was published by the Wall Street Journal columnist, Paul Chanon.
He believes that this restructuring is very dangerous for the Eurozone in all its aspects as the sooner it takes place the greater will be the negative impact be for Eurozone banks. On the other hand however, the later it takes place more and more disbelieving and skeptical taxpayers from debt- borrowing countries could react to the idea of another country resorting to financial support of. Therefore all this disbelieve will be a major test for the consistency and structure of the Eurozone.
According to Channon over the period of time, the debts of the Greek, Irish, and soon the Portuguese government are being transferred from the private to public sector with private lenders not being willing to further fund their governments. Therefore, bonds of the above government, lenders have in their possession , are being liquidated once as they reach maturity and their funds are being invested elsewhere. Over the months, the EU and the IMF replace these private sources of financing resulting to increasing their exposure to growing debt obligations of the three governments. It is estimate by WSJ that if a debt restructuring was to occur now private investors should expect for about 50% of their funds to be written off.