By Stavros Lygeros

Although details about the eurozone deal on Greek debt remain unclear, it looks certain that the haircut will neither include EU/IMF loans nor some 62 billion euros worth of Greek bonds purchased by the European Central Bank (ECB) at a lower price on the secondary market.

This exemption is mentioned in the July 21 agreement. In practice, it means that when the Greek bonds expire, the ECB will collect their nominal value with a 20- to 45-percent profit.

The ECB was exempt from the haircut on the argument that it is not a private sector enterprise. The argument, of course, does not hold water. The ECB is a eurozone institution designed to ensure the stability of the common currency and not some market speculator. If the Frankfurt-based institution bought the Greek bonds on the secondary market to fulfill its role, then it should be exempt from the haircut. However, when every bond matures, it must also collect from Greece the exact amount it paid to purchase it. This would equal an additional writedown of about 20 billion euros.

Furthermore, from a political as well as a moral perspective, the ECB must not collect the whole annual interest, but only the interest that corresponds to the actual purchasing value rather than the nominal value of every bond. If, on the other hand, the ECB bought the Greek bonds in the secondary market with an eye for profit, then it must take a 50 percent haircut like any other speculator. These are the rules and ethics of the market that Jean-Claude Trichet supposedly strives for.

It is worth noting that while European officials sought to exempt the ECB from the haircut on the grounds that is not a private sector investor, they refused to exempt pension funds on the grounds that these concern private, not public sector savings -- a clear case of double standards.

Pretexts and legal acrobatics aside, it makes no political or ethical sense that the ECB speculates at the expense of a debt-wrecked EU member state. The argument that the purchase of Greek bonds on the secondary market does not concern Greece is pure hypocrisy. Had the ECB not bought Greek bonds these would now be in the hands of the private sector and they would be set for a 50 percent writedown. The result would be an additional haircut of 31 billion euros and a lower interest.