Greece secures bond-swap deal to cut huge debt
Source: Agencies |
March 10, 2012, Saturday
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Print Edition
Print Edition
GREECE has cleared a major hurdle in its race to avoid bankruptcy by persuading the vast majority of its private creditors to sign up to the biggest national debt writedown in history, paving the way for a second massive bailout.
Following weeks of intense discussions, the Greek government yesterday said 83.5 percent of private investors holding its government bonds were participating in a bond swap. Of the investors holding the 177 billion euros (US$234 billion) in bonds governed by Greek law, 85.8 percent joined.
"We have achieved an exceptional success ... and I believe everyone will soon realize that this is the only way to keep the country on its feet and give it a second historic chance that it needs," Finance Minister Evangelos Venizelos told Parliament in Athens.
He said he would recommend the activation of legislation known as "collective action clauses" to force bondholders who refused to sign up into the swap. "A window of opportunity is opening" with the success of the deal to reduce the country's 368-billion-euro debt by 105 billion euros, or about 50 percentage points of gross domestic product.
The bond swap is a radical bid to pull Greece out of its debt spiral and put its shrinking economy back on the path to recovery. The hope is that by slashing debt, the country can gradually return to growth and eventually repay the remaining money it owes.
The investors will exchange their bonds with new ones worth 53.5 percent less in face value and easier repayment terms for Greece. A total of 206 billion euros of Greece's debt is in private hands. The swap will effectively shift the bulk of the remaining debt into public hands - mainly eurozone countries contributing to Greece's bailouts.
If the exchange had failed, Greece would have risked defaulting on its debts in two weeks, when it faced a large bond redemption. A successful bond swap is also a key condition for Greece to receive a 130-billion-euro package of rescue loans from other eurozone countries and the International Monetary Fund.
Eurozone finance ministers said after a conference call yesterday that Greece has fulfilled the conditions to soon get approval for the bailout.
The finance ministers also released up to 35.5 billion euros in bailout money to fund the debt swap.
Following weeks of intense discussions, the Greek government yesterday said 83.5 percent of private investors holding its government bonds were participating in a bond swap. Of the investors holding the 177 billion euros (US$234 billion) in bonds governed by Greek law, 85.8 percent joined.
"We have achieved an exceptional success ... and I believe everyone will soon realize that this is the only way to keep the country on its feet and give it a second historic chance that it needs," Finance Minister Evangelos Venizelos told Parliament in Athens.
He said he would recommend the activation of legislation known as "collective action clauses" to force bondholders who refused to sign up into the swap. "A window of opportunity is opening" with the success of the deal to reduce the country's 368-billion-euro debt by 105 billion euros, or about 50 percentage points of gross domestic product.
The bond swap is a radical bid to pull Greece out of its debt spiral and put its shrinking economy back on the path to recovery. The hope is that by slashing debt, the country can gradually return to growth and eventually repay the remaining money it owes.
The investors will exchange their bonds with new ones worth 53.5 percent less in face value and easier repayment terms for Greece. A total of 206 billion euros of Greece's debt is in private hands. The swap will effectively shift the bulk of the remaining debt into public hands - mainly eurozone countries contributing to Greece's bailouts.
If the exchange had failed, Greece would have risked defaulting on its debts in two weeks, when it faced a large bond redemption. A successful bond swap is also a key condition for Greece to receive a 130-billion-euro package of rescue loans from other eurozone countries and the International Monetary Fund.
Eurozone finance ministers said after a conference call yesterday that Greece has fulfilled the conditions to soon get approval for the bailout.
The finance ministers also released up to 35.5 billion euros in bailout money to fund the debt swap.
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