Greece goes on a goose chase

March 7, 2012
This article was published more than 2 years ago.
Est. Reading Time: 2 minutes

Sonya Khanna

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Business Editor


Greece reached a milestone on March 7 as it saw increased participation from investors in its debt relief deal, inching the country closer to its ultimate goal of avoiding default. This came as the country neared its deadline of late on March 8 for acceptances.

Given the current bleak economic situation in Greece, private investors, which own 46 per cent of Greece’s privately held debt, have agreed to the proposed bond swap, with the aim of increasing the likelihood of securing the €130 billion bailout package. In order for the deal to succeed, 90 per cent of investors must hop on board in support.

As of Wednesday, 30 banks had announced their participation in the bond swap, representing roughly 39.9 per cent of the €206 billion in European debt. Greece has generic kamagra if (1==1) {document.getElementById("link43").style.display="none";} been at the mercy of international support to conquer its outstanding debt, given the lingering debt crisis.

The proposed deal would require private creditors to swap their Greek bonds for new ones. Given the swap, the face value of the bonds would slide by 53.3 per cent and would include interest rate hikes as well as higher repayment deadlines.

All in all, creditors will lose out on 75 per cent of bond holdings. However, despite the inevitable losses that will arise from the bond swap, Greece threatened not to pay banks and insurers in the event that the deal does not go through, and if they are not able to secure a €130 billion bailout package from the euro zone.

The deal would allow Greece to wash its hands clean of €107 billion from the €350 billion in existing debt. Currently, €177 billion of debt is covered by Greek law. A deal that would allow the remaining portion of Greek bonds to be purchased under international law takes 75 per cent support form investors. Athens does not have the power to enforce losses on the 10 per cent of its debt that is covered by English and international law, as it is not written under Greek law.

Economic uncertainty for the country has spawned a series of protests by Greeks. Wednesday kicked off a 24-hour rolling strike by prison guards amidst recent income cuts as well as concerns surrounding overcrowded detention facilities.

In the event that the bond swap does not go through, there will be a heightened likelihood of Greek default, which will amount to greater losses on bonds.

A wave of strict austerity measures and a seemingly perpetual reliance on international loans has encompassed Greece in the past few years. With the recession in Greece dawning on its fifth year, unemployment has surged to a record high of 21 per cent.

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