Greece's bond haircut won't make things easier in the short term - (Έτσι μας σώζει ο τραπεζίτης !)

Greece's Prime Minister Lucas Papademos: facing higher interest payments Photograph: Yiorgos Karahalis/Reuters

Will the Greek government in reality be much better off after the "haircut" still being negotiated on its debt?

Negotiators from the Institute of International Finance, a consortium of Greek bondholders, have agreed to swap their current bonds for new ones worth just 50% of their current value, although the final figure has still to be thrashed out. But in return, they are understood to be demanding that the future interest rate on the new bonds will be around 8% a year. That means that bondholders will receive almost the same amount of interest they are currently getting.

In other words, the cost to the Greek government of servicing their giant debt may not fall by much, if at all. The crucial debt-to-GDP ratio will fall, and when the bonds mature, there is obviously less debt to repay, but the portion of government spending eaten up by paying the interest on the bonds will stay much the same until then. It's like changing your mortgage from £200,000 on 5% a year to £100,000 on 10% a year. You owe less, but the monthly amount coming out of your pay to service the loan stays the same, so you're not immediately better off.

http://www.guardian.co.uk