Assets and Default

If I owned a bunch of property and were going into default on some debts, the guys to whom I owed money might ask me whether I ought to consider selling some of those properties to pay my bills. And, if my kids were starving because of the austerity I'd otherwise had to impose on the family budget to keep the bondholders at bay, why wouldn't I consider a bit of asset divestiture?

Greece has somewhere around 6000 islands in one of the most beautiful parts of the world. Islands of legends and Greek Gods and stuff. Islands that, you'd expect, would be worth something to somebody. Some of them are privately owned and do trade. Here's one place you can go to buy one.

But all those islands are encumbered with Greek sovereignty. Own the island, own the  entanglements of the Greek state that make development, well, hard.

First of all, to date it is rather hard for someone to develop a private island because of the Greek state bureaucracy and the domestic Archeological Agency, which is stringent in its examination of every case that involves an island that may have antiquities of any kind lurking under its soil. 

And that's just for setting up the island as a holiday home. If you have to provide a stool sample to get through the regs letting you set up a web-based business, a Greek Island isn't going to be your first pick for doing anything innovative.

Imagine being able to bid on an island in the middle of the Mediterranean within a short flight of Europe, the mid-East, and northern Africa where Greece wouldn't just hand you title, they'd hand you sovereignty? There has to be a ton of value locked up in those islands that could be released by Greece being willing to relinquish sovereignty. Restrict it to the uninhabited islands to keep things simple, for starters.

Seasteading is cool. But imagine kickstarting it by letting a thousand sovereign islands bloom in the Aegean Sea? Keep the Americans happy by barring sale to anybody currently on terrorist watch lists.

There has to be some good reason that Greek bondholders haven't asked for sovereign ownership of Greek islands in exchange for debt writedown; the potential asset value just sitting there seems pretty obvious. Devilled if I know what's preventing it though. Surely most Greek citizens would prefer losing half their islands to the mess they're currently in. On the bondholder side - Bond debt, that's just money. Your own country in the Aegean? Priceless.

Potential obstacles:

• Nobody trusts the Greeks not to renege by reasserting sovereignty somewhere down the line; most other countries would probably back them against sovereign individual property owners too.
• Germans are reluctant to look at anything that seems territorial expansion.
• The Americans might not let them.
• The EU might not let them.

Does anybody know what the binding constraint is?