ECB's Weidmann says Greece would have to earn haircut

I generally agree with Herr Weidmann, but disagree with him on this one. Here is where he is wroing:

Greece is on the verge of primary balance in its annual budget. What that means is that the expenses to run its government and the revenue its government takes in are nearly in balance. But, on top of its ordinariy expenses it has to spend for debt interest and capital repayment; that is what is driving it into bankruptcy. So, if its debt were forgiven, Greece could recover and once again become an upstanding member of the Eurozone community. But if its debt is not forgiven, it can never recover.

In other words, the debt needs to be forgiven first, and then it can fulfill all of its promises. But if the debt is not forgiven, it will go bankrupt before it can fulfill its promises. If that happens, no one gets paid anyway … and the “haircut” will take place in a disorderly way, rather than ordinary way being proposed by people like Coene and Lagarde.