News Column

Greek Rescue Hopes Grow

March 7, 2012

Russell Lynch

100 euro notes

Greece's euro 130 billion (pounds sterling 108 billion) financial rescue looked on safer ground today as more banks came out in support of a crucial debt swap designed to slash its debt burden and avoid default.

Societe Generale, France's second biggest bank, and Italy's UniCredit are backing the deal, which will see private investors swap euro 206 billion of existing bonds for paper worth far less, taking a 70 percent hit in the process.

The deadline for the agreement on the "voluntary" deal -- also backed by Greece's six biggest banks late last night -- looms late tomorrow night. The FTSE 100 slipped nearly 2 percent yesterday amid warnings from international bankers over a euro 1 trillion blow to Europe from a chaotic Greek default, although the blue-chip index stemmed the losses today, adding 16.72 points to 5782.52.

British banks were tight-lipped over their participation in the scheme although sources at Barclays and Lloyds emphasised their "minimal" sovereign exposure. HSBC has already written down its $400 million (pounds sterling 254 million) sovereign bond holdings by more than half. State-backed Royal Bank of Scotland has slashed its Greek bond holdings by pounds sterling 1.1 billion to pounds sterling 409 million, a bigger hit than the proposed haircut on the table.

Greece is ideally looking for 90 percent participation from private investors to get the deal done. But prime minister Lucas Papademos will press ahead with support above 75 percent, using "collective action clauses" to force the deal through.

Source: (c) 2012 the London Evening Standard

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