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SATURDAY, FEBRUARY 25, 2012
ATHENS: Greece will launch a bond swap
yesterday under a deal with private investors
to write off 107 billion euros from its debt
mountain of 350 billion euros ($462 billion).
The bond swap, in effect a cancellation of
nearly a third of debt owned by Greece, is a
critical part of a debt rescue stitched together
with immense difficulty by the eurozone and
International Monetary Fund, to avert imminent
default. It is a second overall rescue for
Greece, but the bond component, now at the
last hour of the timetable for application,
depends on the rate of participation by private
investors.
Finance Minister Evangelos Venizelos said
an official offer to private creditors must be
made by yesterday so the debt swap can be
concluded by March 12 on a first set of bonds.
Bankers, insurance companies and hedge
funds which hold Greek government bonds
were to get precise proposals on the debt
swap, deciding whether to take a 53.5-percent
loss on their holdings. The bond deal
was reached with negotiators from the body
Full mechanism to cover liquidity
representing private creditors, the Institute of
International Finance.
The announcement of the swap offer was
expected after approval by the government,
due at meeting beginning later in the morning,
a statement from Prime Minister’s Lucas
Papademos said. The call comes a day after
the Greek parliament adopted an emergency
law allowing the historic debt write-down
with private creditors. The law details terms of
the so-called Private Sector Involvement (PSI)
accord, agreed during the marathon talks in
Brussels.
Under the terms of the overall Brussels
accord, Greece will receive up to 130 billion
euros in direct loans by 2014, helping it avert
a debt default next month, in return for tough
new austerity measures and tighter EU-IMF
oversight of its economy. After months of
talks, it seems likely that most private creditors
will accept the deal, mindful that they
could get nothing at all if Greece were to
default. If Greece gets at least 66 percent of
the private creditors to sign up the deal, it
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plans to impose a Collective Action Clause
(CAC) which would force any hold-outs to
accept it too. Venizelos said an official offer to
creditors had to be made by yesterday, so a
debt swap could be concluded by March 12
for maturities governed by Greek law, and by
early April for debt issued under English and
Japanese law. The rescue package should be
enough to avert a default by enabling Athens
to repay maturing debt worth 14.43 billion
euros due on March 20.
Venizelos said rating agencies “might
declare Greece in selective default” while the
debt-swap operation was ongoing. “A selective
default is only critical if the ECB
(European Central Bank) and the eurozone
consider it so. There is a full mechanism to
cover liquidity in the meantime,” Venizelos
said. Until the end of February, Greece should
approve more than three billion euros in
additional spending cuts and amend the constitution
to ensure that debt repayments take
priority over other government commitments-as
demanded by the eurozone finance
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BERRIOZAR: A man holds placards against eviction by a leading Spanish Bank, reading: ‘’The Beast’s Day. Stop Evictions’’, while he stands beside a house where
people are threatened with eviction yesterday. — AP
Greece to launch bond
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ministers. The parliament is now to turn to
adopt legislation by next Thursday on further
austerity cuts and tough targets required to
get an additional 130 billion euros in loans.
But the prospects for a crucial bailout were
clouded on Thursday after the European
Commission said Greek economy would
shrink 4.4 percent this year, much worse than
its previous estimate of 2.8 percent. Greece,
stuck in recession for five years and with
unemployment above 20 percent and rising,
has had to revise up its public deficit targets
for this year to 6.7 percent from 5.4 percent of
gross domestic product.
Many analysts believe that Greece cannot
generate the growth needed to sustain its
debt burden even after the latest bailout, seeing
the accord as simply delaying an
inevitable default. In Brussels, EU officials said
eurozone finance ministers will meet on
March 1 to assess Greece’s readiness for the
programme, needed after a 110 billion euros
deal agreed in May 2010 proved not to be
enough. — AFP