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UPDATE 2-Bond swap talks between Greece, banks enter final stretch
Reuters - 12/01/2012 14:17:01
(Recasts, adds details)
By Lefteris Papadimas and George Georgiopoulos
ATHENS, Jan 12 (Reuters) - Greece's prime minister held crunch talks with the head of a group representing private sector banks on Thursday, as officials saidnegotiations on a voluntary swap of bonds to lighten the country's debt burden entered the final stretch.
Talks between Greece and its creditors have dragged on for months. But sources say a deal will be wrapped up in days to pave the way for avisit next week by inspectors for international lenders, who are finalizing the details of the country's second 130 billion euro ($165 billion) rescue plan.
What is not clear is whether there will be sweeping take-up of the bond swap by Greece's private creditors or whether it will leave a hole in the second bailout package which has to be filled by fellow euro zone governments.
Officials described the two-hour meeting between Charles Dallara - the head of a bank group who isnegotiating on behalf of all private sector creditors - and Greece's prime minister and finance minister as "interesting" and "creative".
"I'm cautious and very confident after this two-hour meeting," Finance Minister Evangelos Venizelos said ina statement.
A government source said the two sides would reconvene on Friday, and Venizelos said more progress was expected at a meeting of European officials in Brussels later on Thursday.
Stumbling through its worst post-World WarII economic crisis, Greece has little time to spare as it races to seal the deal to secure funding and avoid going bankrupt in over a month.
The bond swap scheme is central to a bailout that foreign lenders drew up in October to help the countryavert a default which could otherwise come in March when Athens faces massive bond redemptions worth 14.5 billion euros.
A deal needs to come well before that, because the paperwork alone takes at least six weeks.
The swap aims to cutGreece's debt burden from 160 percent of the nation's annual output to 120 percent by 2020 and erase about 100 billion euros from the country's debt load of over 350 billion euros.
Banks have agreed to a "voluntary" 50 percent write-down on Greek debt holdings but the talks have been complicated by demands for further concessions, which has made it less attractive for some investors to take part on a voluntary basis.
FURTHER SUPPORT NEEDED?
Speculation has centred onwhether that means euro zone governments would be forced to stump up more cash to save Athens, something that would be deeply unpopular in Germany and other northern euro zone countries. (news)
IMF chief Christine Lagarde is also said to have warned Europe that Greece's economic prospects are deteriorating and the European Union will either have to put up more money to rescue Athens or debt holders will have to stomach steeper losses. (news)
Asked to explain whyLagarde was discussing the possibility of Greece needing additional funds, Deputy Finance Minister Filippos Sachinidis said that could depend on the level of participation in the bond swap scheme.
"If the percentage of participation is not, forinstance, 100 percent, then Greece may need further support from the side of our partners," Sachinidis told Skai radio.
The talks cover the gamut of details, including the coupon rate, maturities and the option of introducing a collective action clause (CAC) that would force all creditors to sign up to the bond swap if a clear majority had voluntarily done so.
Three senior euro zone sources said on Thursday that Athens could impose retroactive collective action clauses to force creditors to sign up to the bond swap.
The clause may be required because sources say hedge funds who have picked up Greek debt are intent on staying out of the bond swap deal. They either prefer letting the country go under, which would triggerthe credit insurance they have bought, or hope to get paid out in full if enough others sign up.
Sachinidis sidestepped a question on whether Greece would insert or activate a collective action clause.
"Let's not jump ahead and let's see how we can seal the technical agreement in such a way that it ensures two things," he said.
"First, a high participation rate and a voluntary participation in the bond swap programme and secondly, that Greek debt ends up with characteristics thatallow analysts monitoring and examining its viability to conclude that after this procedure it is sustainable."
(Additional reporting by Dina Kyriakidou, Lila Chotzoglou and Angeliki Koutantou, Writing by Deepa Babington, editing by Mike Peacock)
Keywords: GREECE BONDS
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By Lefteris Papadimas and George Georgiopoulos
ATHENS, Jan 12 (Reuters) - Greece's prime minister held crunch talks with the head of a group representing private sector banks on Thursday, as officials saidnegotiations on a voluntary swap of bonds to lighten the country's debt burden entered the final stretch.
Talks between Greece and its creditors have dragged on for months. But sources say a deal will be wrapped up in days to pave the way for avisit next week by inspectors for international lenders, who are finalizing the details of the country's second 130 billion euro ($165 billion) rescue plan.
What is not clear is whether there will be sweeping take-up of the bond swap by Greece's private creditors or whether it will leave a hole in the second bailout package which has to be filled by fellow euro zone governments.
Officials described the two-hour meeting between Charles Dallara - the head of a bank group who isnegotiating on behalf of all private sector creditors - and Greece's prime minister and finance minister as "interesting" and "creative".
"I'm cautious and very confident after this two-hour meeting," Finance Minister Evangelos Venizelos said ina statement.
A government source said the two sides would reconvene on Friday, and Venizelos said more progress was expected at a meeting of European officials in Brussels later on Thursday.
Stumbling through its worst post-World WarII economic crisis, Greece has little time to spare as it races to seal the deal to secure funding and avoid going bankrupt in over a month.
The bond swap scheme is central to a bailout that foreign lenders drew up in October to help the countryavert a default which could otherwise come in March when Athens faces massive bond redemptions worth 14.5 billion euros.
A deal needs to come well before that, because the paperwork alone takes at least six weeks.
The swap aims to cutGreece's debt burden from 160 percent of the nation's annual output to 120 percent by 2020 and erase about 100 billion euros from the country's debt load of over 350 billion euros.
Banks have agreed to a "voluntary" 50 percent write-down on Greek debt holdings but the talks have been complicated by demands for further concessions, which has made it less attractive for some investors to take part on a voluntary basis.
FURTHER SUPPORT NEEDED?
Speculation has centred onwhether that means euro zone governments would be forced to stump up more cash to save Athens, something that would be deeply unpopular in Germany and other northern euro zone countries. (news)
IMF chief Christine Lagarde is also said to have warned Europe that Greece's economic prospects are deteriorating and the European Union will either have to put up more money to rescue Athens or debt holders will have to stomach steeper losses. (news)
Asked to explain whyLagarde was discussing the possibility of Greece needing additional funds, Deputy Finance Minister Filippos Sachinidis said that could depend on the level of participation in the bond swap scheme.
"If the percentage of participation is not, forinstance, 100 percent, then Greece may need further support from the side of our partners," Sachinidis told Skai radio.
The talks cover the gamut of details, including the coupon rate, maturities and the option of introducing a collective action clause (CAC) that would force all creditors to sign up to the bond swap if a clear majority had voluntarily done so.
Three senior euro zone sources said on Thursday that Athens could impose retroactive collective action clauses to force creditors to sign up to the bond swap.
The clause may be required because sources say hedge funds who have picked up Greek debt are intent on staying out of the bond swap deal. They either prefer letting the country go under, which would triggerthe credit insurance they have bought, or hope to get paid out in full if enough others sign up.
Sachinidis sidestepped a question on whether Greece would insert or activate a collective action clause.
"Let's not jump ahead and let's see how we can seal the technical agreement in such a way that it ensures two things," he said.
"First, a high participation rate and a voluntary participation in the bond swap programme and secondly, that Greek debt ends up with characteristics thatallow analysts monitoring and examining its viability to conclude that after this procedure it is sustainable."
(Additional reporting by Dina Kyriakidou, Lila Chotzoglou and Angeliki Koutantou, Writing by Deepa Babington, editing by Mike Peacock)
Keywords: GREECE BONDS
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