The Cove Street team remains confident we will see a European Vacation at an acceptable exchange rate.

Here is a nice paid clip from the FT:

S&P: Calling a Spade a Spade

Be careful what you wish for. Those European politicians who cheerfully criticised rating agencies for falling under the influence of their structured credit clients might now wish that the arbiters of debt quality were a little more pliable. Standard & Poor’s, arguably the leader of that small and still powerful pack, has thwarted the latest euro-scheme to keep Greece from being declared in default on its sovereign obligations. S&P explained on Monday that a flat rectangular steel blade attached to a long wooden handle is indeed called a spade.

The French banks have emphasized the entirely voluntary nature of their complex rollover scheme. For S&P, though, this is not the point, any more than the voluntary nature of a condemned criminal’s walk to the scaffold. A default occurs when creditors are forced to accept a loss, whether or not there are negotiations on the hows and how much. The seven-page S&P note makes a persuasive case that the French plan would qualify as a selective default.

The claim that the agency is overcompensating for its spade-blindness before the financial crisis is impossible to prove or refute. But it is irrelevant. Since S&P’s standards for defining a default date from 2009, when it made public post-crisis revision, its judgment should not come as a surprise. However, the issue of Greek debt has been marked by wishful thinking from almost everyone in the Eurozone—governments, lenders, the European Central Bank and even the Eurostat statistical agency—ever since the Hellenic Republic first applied for entry into the single currency.

Eurozone politicians and the ECB should thank S&P for telling the truth. The official strategy of delay and obfuscation has bought time, but it is now only increasing the fear of a disorderly euro meltdown. It is time for more forthright treatment.