If the Greek rescue effort follows the 1998 Russian model, Europeans will pay for bailout and investors will recoup

As the financial markets try to absorb news of a rescue package for Greece and other teetering euro-zone economies, some bankers and economists see parallels to Russia’s default in 1998, Andrew E. Kramer reports in The New York Times.

A decade ago Russia was walking in the same shoes as Greece is today, striving to restore confidence in government bonds by seeking a huge loan from the International Monetary Fund and other lenders. Then, as now, the debt crisis was roiling global financial markets. And hopes were pinned on a bailout — one that in Russia’s case did not work.

“Greece creates a remarkable sense of déjà vu,” Roland Nash, the head of research for Renaissance Capital investment bank in Moscow, wrote in a recent note to investors. The 1998 bailout designed for Russia, in the form of a rescue package offered by the International Monetary Fund, had the effect of forestalling but not preventing Russia’s defaulting on its foreign debt.

During the month between the announced rescue and that default, Russian and Western banks frantically cashed out of short-term debt as it matured, changed the rubles into dollars and spirited the money out of Russia.

The bailout propped up the exchange rate through this process, enriching those bondholders who got out early and leaving the embittered Russian public holding the debt and having to pay back creditors, including the I.M.F. By Aug. 17, 1998, when the government announced a de facto default on Russia’s foreign debt and said it would allow the ruble to float more freely against the dollar, the World Bank and monetary fund had disbursed about $5.1 billion of the bailout money.

Some analysts say that if a similar pattern takes hold in the euro-zone rescue, it could be European taxpayers paying for the bailout while investors in Greek debt are largely made whole.