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"Selective default" with guarantees Trichet
Kalountai rushed to Brussels, Mr. Provopoulos and V. Rapanos to ratify the agreement
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After seven hours of negotiations in Berlin, Angela Merkel and Nicolas Sarkozy attended by ECB President Jean Claude Trichet appears to have reached the "golden mean" for the Greek cause.
The solution, details of which remain unknown, based on a proposal Dalaras's Institute of International Finance's (IIF) and provleepei:
-Repurchase bonds through EFSF,
Elongation-time repayment of the securities held by banks for 15-30 years, and
-Reduction rate for epimikynomena bonds at between 3% and 3.5%.
All this plan leads to involvement of individuals which means that the risks out of a possible assessment of country by foreign firms in the category of "selective default".
H Greek Government claims guarantees the Summit will continue uninterrupted funding of Greek banks and ensure liquidity in the Greek economy. Reportedly called hastily in Brussels, the governor of the Bank of Greece, Mr. G. Provopoulos and B. Rapanos as president of the Union of Greek Banks to ratify the agreement.
The whole effort is to ensure that the impact of this development will be "controlled" and will be covered by European guarantees.
Certainly the immediate and biggest problem is the impact of decisions on the Greek banking system is exposed to the Greek titles to a large extent - is estimated that the portfolio of Greek banks are securities with a denomination of more than 50 billion euros. It is notable that the same report states that "a roll over of Greek bonds would deprive the domestic banking system 10-16 billion" as the final decision on time extension, and any "haircut" to be decided today.
H FINAL PROPOSAL IIF TO GREEK BONDS
The focus of discussions and final decisions is the proposal of the IIF.
The note that arrived in Greece after the recent meetings with bankers in Rome describes the proposal for the Greek cause as follows:
"The main proposal being made to meet the funding requirements and debt sustainability in Greece through a set of options designed to mobilize at least 90% of private investors Greek debt. The project is planned to cover the total debt held by individuals investors amounted to 240 billion. It will reduce significantly the financial needs of the country based on official data and put the debt at a sustainable level. will inevitably include losses for investors but will pay particular attention to maintaining those losses to a manageable level.
The proposals of the Working Group IIF will reduce significantly the financial needs of the country for the period beyond the planned three-year plan will likely be activated soon. This means that will allow Greece to return to the markets as early as late 2013.
Along with the participation of the private sector will require funds from institutional sources (the European Instrument for Stability EFSF and IMF) to finance the program of fiscal consolidation in Greece and the borrowing needs of the country estimated at 60 billion
If adopted the proposals of the IIF and combined with funds from the EU and the IMF will meet the financial needs of the next three years and will probably prevent the need for new capital.
But it is necessary to continue after the next three years the efforts of Greece and to achieve the agreed objectives strictly to create a primary surplus and strengthen the overall Greek economy.
At the end of the three-year Greek debt is not found in most at the hands of institutions but a combination of public and private sector. "
THE THREE PROPOSALS
First sentence
-100% Passing (rollover) of bonds maturing by 2020 (estimated at 160 billion Euro)
S new 30-year term bonds will have fixed or floating interest rate below the current market rate
2nd sentence -Exchange debt at 100% of all bonds in circulation with new 3oetous term
-They will either be issued at par value of old or with a value less than the old
-Will require guarantees possibly through CDS
Third sentence
Repurchase of debt-creating mechanism that will buy bonds from the secondary market at significantly lower price
-Up 30-40 billion fund with the participation of EFSF, the IMF and other institutions outside the EU
The IIF estimates that there should be these options to increase private sector participation. This is regarded as almost certain that the rating agencies will feature the participation selective default. However, the activation mechanism may be avoided.
It is estimated that private participation will cover approximately 25% of financial needs in Greece for years and that the debt will be reduced by 10-15 percentage points relative to GDP.
REPORT OF THE European Commission
Certainly such a development requires a unanimous decision of EU leaders who will also have to decide collectively, and to announce measures that will have three objectives:
1. To preserve the stability of the Greek and European banking system and especially to maintain high levels of liquidity for banks.
2. To ensure that in future borrowing to Greece - in government and business - the markets will not be prohibitive and that can only be achieved by providing specific guarantees, and
3. To prevent the spreading of the crisis or the anticipation of similar developments in highly indebted countries of the South that are in turmoil and accept market pressures.
These risks are listed in the report of the European Epitroppis for the viability of the Greek debt is also at the table summit
