Moody΄s: Enhanced EFSF Could Speed Greek Bank Recapitalization
LONDON (Dow Jones)--Planned changes to the European Financial Stability Facility--the euro-zone΄s temporary bailout facility--could accelerate Greece΄s sovereign debt restructuring and bank recapitalization, Moody΄s Investors Service said Monday.
Moody΄s analysts Mardig Haladjian and Alain Laurin said in the ratings company΄s Weekly Credit Outlook publication that the German lower house of Parliament΄s approval last week of the expansion of the EFSF, which will allow the fund to support bank recapitalisations, "paves the way to extend further support to the ailing Greek banking system within a broader Greek debt restructuring programme.
"As part of a likely government debt restructuring programme, the European authorities will strive to recapitalize the banking system in an effort to avoid a complete collapse of the economy," they said.
According to Moody΄s projections, a Greek sovereign debt restructuring would need to involve writedowns of at least 60% to get the country΄s debt burden to sustainable levels.
Based on their current holdings of Greek government bonds, that would see Greek banks suffer an additional writedown of EUR27 billion, wiping out the total equity in the country΄s banking system.