Greece’s infamous “pharma bonds” // The bonds are zero-coupon debt issued to companies that were owed cash — €5.6bn of it — from Greek hospitals between 2007 and 2009

Interestingly, Deo’s note assesses whether Greece’s infamous “pharma bonds” are already akin to this process. The bonds are zero-coupon debt issued to companies that were owed cash — €5.6bn of it — from Greek hospitals between 2007 and 2009. As the FT’s John Dizard wrote way back in July 2010, the Greek government also added a 19 per cent discount to the original size of hospital suppliers’ claims. Suppliers seem to have sold the bonds as soon as they received them, despite the heavy discounts involved.
At any rate, here’s the argument from UBS (link added):

Are pharma bonds another form of quasi-monies, like the Argentinean Patacones or the Californian IOU? Yes and no. Those two above examples shows that in both cases it was very close to money printing, if not actually money printing in bona fide. The Greek pharma bonds present a number of similarities:
- In the three cases, Argentina, California and Greece, the reason they were used is once again nominal rigidity of the budget and the inability of a government to address the deficit properly in the context of a monetary union.
- In all cases, the payment of arrears was done by printing a financial instrument.
- In all cases, the instrument was tradable and could be used as a means of payment, or at least be redeemed.
- In all cases, the quasi-money was only temporary; in the case of Argentina and Greece because the financial instrument was a bond with a fixed duration, in the case of California because the IOUs were supposed to be refunded as soon as the budget allowed.
- To that extent, we would argue that Greece was indeed approaching the grey area of quasi-monies. There is, however, one important distinction. In both the case of Argentina and California, the financial instrument were supposed to be a means of payments for private individuals and in doing so increased the money available. This is not really the case in Greece…

 http://ftalphaville.ft.com/blog/2012/02/08/873921/greek-funny-money/