Amid the steaming wreckage of the Greek bailout on Thursday â a little Goldman hopefulness on what to do next. Not a rollover. Not a restructuring, technically. A âmanaged deleveragingâ. Actually what the bankâs analyst, Francesco Garzarelli, is proposing looks like a curious hybrid of bond buyback and one-off fiscal transfer. Theyâre ideas that had been absolutely central to the Greece debate merely months ago, but were rapidly overtaken as the countryâs finances continued to implode and bailout fatigue in the northern eurozone multiplied. Garzarelli is resurrecting them again because official exposure to Greece is rising and rising as time goes on, which is making the amount that eurozone taxpayers would lose in a default bigger and bigger. (Note that Garzarelli is including European Central Bank holdings of private debt as official exposure). As Garzarelli argues: If this is the âend gameâ, we continue to believe that secondary market purchases of Greek debt by a joint European vehicle (a policy option that has been rejected in March, but could be dusted off) would achieve several objectives, particularly now that Greek bonds trade at distressed levels (the average weighted price of those maturing between 2014 and 2015 is in the low 60s, while that of bonds maturing after 2016 is around 50c). First, if financial institutions were âvoluntarilyâ asked to sell bonds maturing in the next few years, this would satisfy the political demand for private-sector participation (pain would fall proportionally more on those institutions that have provisioned less for losses). Second, the money saved relative to a notional-for-notional replacement of bonds with loans could be used to recapitalize the Greek banks, and offer the European taxpayer some buffer in the event of a âhaircutâ down the line. And third, if the purchases involved the portfolio held by the ECB, this would enhance the credit quality of the balance sheet of the central bank. The idea is that official exposure would âorganicallyâ deleverage over time. Anyone see the problems here? Europe tried to prop up Greeceâs bond prices for months, via the ECBâs Securities Markets Programme, making a buyback uneconomical. Itâs all been for nothing, except perhaps some borrowed time. Perhaps this is ironic rather than problematic, however. The real problems are that a) the figleaf of âvolunteeringâ in the plan would be toast before the rating agencies (perhaps thatâs only a problem in the minds of the ECB) and b) the fiscal transfer issue isnât solved. Itâs only shifted around or assigned to conceivably more useful purposes, like bank recapitalisation. Still a massive risk however. Thereâs also the small issue of Greek domestic politics being the sole driver of any actual solution to the debt crisis at this point⦠http://ftalphaville.ft.com/?segid=70409