Talks break down with private investors


Talks between the Greek government and private investors (the banks) broke down yesterday. The talks are about a possible bond swap where old bonds would be exchanged for new bonds with the banks taking a ‘large hit’ on the amount of debt they would be able to recover. In other words, how much interest rate the investors would get on the new bonds.

If Greece does not conclude successful talks with private investors then the chances of a disorderly default are high, leading to no further support under the EU/IMF bailout agreement and the probable ejection from the Eurozone.

The Institute of International Finance which is leading the talks on behalf of private investors issued the following press release yesterday:

“Charles Dallara and Jean Lemierre, Co-Chairs of the Steering Committee of the Private Creditor-Investor Committee (PCIC) for Greece, continued discussions today in Athens with Prime Minister Lucas Papademos and Deputy Prime Minister and Finance Minister Evangelos Venizelos on a voluntary PSI for Greece, against the background of the October 26/27 Agreement with the Euro Area Leaders. Unfortunately, despite the efforts of Greece’s leadership, the proposal put forward by the Steering Committee of the PCIC—which involves an unprecedented 50% nominal reduction of Greece’s sovereign bonds in private investors’ hands and up to €100 billion of debt forgiveness— has not produced a constructive consolidated response by all parties, consistent with a voluntary exchange of Greek sovereign debt and the October 26/27 Agreement.

Under the circumstances, discussions with Greece and the official sector are paused for reflection on the benefits of a voluntary approach. We very much hope, however, that Greece, with the support of the Euro Area, will be in a position to re-engage constructively with the private sector with a view to finalizing a mutually acceptable agreement on a voluntary debt exchange consistent with the October 26/27 Agreement, in the best interest of both Greece and the Euro Area.”

On 20th March €14.5 billion worth of Greek government bonds mature. If the government hasn’t secured a deal with private investors and secured the release of another tranche of EU/IMF bailout money then there will be a default.

The two sides are planning to meet again on 18th January.

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