News Column

Greece 'Optimistic' as Debt Swap Enters Final Stretch

March 5, 2012

Greece's government was "optimistic" Monday that participation in a crucial debt swap with banks and private investors would be completed successfully by the end of the week.

"We remain optimistic ... but we expect that until the last moment there will be a lot of uncertainty about how things will go," a Finance Ministry official told dpa.

Banks and private holders of nearly 206 billion euros (271 billion dollars) in Greek bonds have until Thursday to decide whether to take part in the debt swap deal.

The government is aiming to secure 66-per-cent participation in the swap deal, which foresees cutting 107 billion euros from the country's debt of up to 350 billion euros. In recent weeks, officials have been pushing for a higher rate of participation.

Athens needs to get 75 per cent of bondholders to participate in the deal in order to avoid having to activate so-called collective action clauses (CAC) to compel those holding out to participate.

Twelve banks and insurance firms pledged on Monday to participate in the swap, including French and German heavyweights BNP Paribas and Deutsche Bank.

The other companies joining in were Allianz, Alpha Bank, Axa, CNP Assurances, Commerzbank, Eurobank EFG, Greylock Capital Management, ING Bank, Intesa San Paolo and the National Bank of Greece.

"Each ... states that it intends to participate in these offers by tendering and, if applicable, voting all securities which are the subject of these offers," they said in a joint statement issued in Brussels by their negotiators, the Institute of International Finance.

But they were also quick to note that their action did not amount to "any recommendation" for other private holders of Greek bonds. "Each such holder must make their own decision," they said.

If less than 66 per cent participate, the entire deal could crumble, making even the CACs redundant and jeopardizing the second 130-billion-euro second tranche put up by eurozone countries and the International Monetary Fund.

The Greek daily Kathimerini quoted bank officials as saying that discussions with bondholders were gaining momentum and that they were optimistic investor participation would surpass 80 per cent.

The deal would see private investors lose 53.5 per cent of the value of their Greek bonds, in exchange for new bonds issued with more favorable repayment terms for the crisis-hit country.

If the voluntary deal with the private creditors does not gain sufficient support, the government of technocrat Prime Minister Lucas Papademos will consider passing legislation to break the deadlock.

Greece has been relying since May 2010 on rescue loans from the eurozone and the IMF.

"Greece is on a good course and we have made good progress on pushing through tough austerity reforms ... We should begin to see growth in 2013," Greek government spokesperson Pantelis Kapsis told private Skai radio.

Meanwhile, Finance Minister Evangelos Venizelos said Monday that Greek bank deposits had fallen by 70 billion euros since the start of the crisis in 2009, an indication of the loss of confidence in the economy.

He said nearly 16 billion euros of the withdrawn funds had been sent abroad while the remainder had been kept in homes or spent as families and businesses ate into their savings.

Venizelos stressed the importance of restoring confidence in order to encourage the return of funds, insisting that a new bailout deal and bond swap would strengthen the financial sector.

Source: Copyright 2012 dpa Deutsche Presse-Agentur GmbH

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