Well, that is what have to happen when you cannot print money like US.

From Terry
There will be a huge side effect for the “50% Voluntary Haircut”.

The Euro leaders came out a bailout plan and the core idea of the plan is “50% of Voluntary haircut”.

The “50% Voluntary haircut” means the lender/risk taker of the Greece debt has to “write down”/give up 50% of their debt in order to let Greece to repay her debt in a sustainable way.

The Euro leaders forced the ISDA to confirmed that the “compulsory” “voluntary haircut” will not trigger any credit events, hence the Credit Default Swap owners cannot claim back any money from the insurance.

Now, CDS on PIIGS is meaningless as it can’t provide any protection for those lenders who buy the PIIGS bond.

As a result, after the haircut, no one want to lend PIIGS money anymore as they cannot buy insurance on it.

In short, the situation is getting worse. ECB will be the only buyer of the PIIGS Bond.