Greece cuts debt by €100 billion
Last night creditors tendered 85.8% of €177 billion in bonds to the Greek government meaning that with the completion of the deal Greece will have eliminated around €100 billion of its national debt.
In the next few days the bonds tendered will go up to 95.7% as the Greek government uses the collective action clauses (CAC) to retrieve more bond debt.
The move, which is an exchange of old bonds for new ones, will see the new bonds holding a lower face value with lower interest rates and a longer time to mature all of which will give Greece important breathing space to get their economy back on line. For the bondholders, for whom much of the negotiations has been done through the Institute of International Finance (IIF) it means a loss of 74% of the value of the original bonds; it was that or lose everything in a disorderly default.
Whilst the bond swap was good news for the government, the bad news came in the form of soaring unemployment figures. New figures released yesterday show that youth unemployment is now 51.1% whilst December 2011 unemployment overall rose to 21% from 20.9% in November.
The overall trend for unemployment remains bleak. In 2011 the average unemployment was 17.3% up from 12.5% in 2010.
The good news for the Greek government is that the country has massive potential for investment. Companies wishing to outsource operations there will find plenty of skilled workers able to take the jobs with costs dropping and a government increasingly keen to welcome new business. Yesterday’s deal might just have seen the start of the turnaround for the Greek people.