ECB Governors are pouring on the sap once again today. Mario Draghi, likely the next ECB president opposes steps that aren’t “purely voluntary.” The irony being there is no such thing at this point of a “pure voluntary” restructuring.

Meanwhile Christian Noyer, warns that a default would mean “financing the entire Greek economy.”

Emergency Session Underway as Yields Hit New Record High

Please consider Euro Finance Chiefs Race to Avert Default

Yields on 10-year Greek bonds climbed to 17.46 percent today, a record in the 17-nation euro-area’s history, before an emergency session of finance ministers in Brussels.

Luxembourg’s Jean-Claude Juncker, who leads the group of euro-area finance ministers, said before the meeting that “all options” will be considered regarding Greece. Austrian Finance Minister Maria Fekter told reporters that members of the group still differ on a bailout model.

ECB Governing Council member Mario Draghi reiterated that the central bank opposes any steps that aren’t “purely voluntary.” The “cost of a default would exceed the benefits” and a “default would not address the root causes of the crisis,” Draghi told lawmakers in Brussels at his confirmation hearing for the ECB presidency.

Christian Noyer, another ECB Governing Council member, said any attempt by euro-area governments to adjust Greek debt that resulted in a default would mean financing the nation’s entire economy.

“Our position is extremely simple: if there is a solution that avoids a risk of default, it seems suitable,” Noyer told journalists in Paris today. “If you can’t find it, it’s better to avoid touching the debt. If despite everything you try to reduce the debt and you provoke a risk of default, you’ll have to finance the entire Greek economy.”

No other sovereign nation is graded as low as CCC by S&P;, a spokesman said by e-mail. Moody Investors Service cut its rating on Greece to Caa1 on June 1, leaving only Ecuador as a worse sovereign risk.

Greek 10-Year Government Bond Yield

The market as well as the S&P; have priced in a default. The only people not to recognize a default is coming are the ECB, the IMF, and Christine Lagarde, the French finance minister who is running to head up the IMF.

In spite of what the ECB and IMF says, the world will not end when Greece defaults.

Mike “Mish” Shedlock
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