IIF Put New Plan On Table Tuesday, Await Euro Zone, Greek Reaction-Source
BRUSSELS (Dow Jones)-Banks put forward a new proposal on Greece to euro-zone governments on Tuesday evening in an effort to break the deadlock over how deep the losses should be to holders of Greek debt, a bank official familiar with the discussions said Wednesday morning.
The source, who would not detail the parameters of the proposal, said the banks are awaiting reaction from euro-zone governments and Greece. The proposal was put forward by representatives of the Institute of International Finance, the bank lobby group whose chief executive, Charles Dallara, has been in negotiations in Brussels for almost two weeks.
The source said the proposal contained a higher discount rate than the 9% agreed on a July 21 deal for Greece agreed by euro-zone leaders. The increase, which reflects the deterioration in Greek bond prices since July, would reduce the impact of any given headline reduction in net present value (NPV). The July 21 deal called for a 21% NPV cut.
The IIF has been insisting that any deal is voluntary, arguing that if the reduction in the value of private bond holdings resulting from any bond exchange exceeds about 40% that would be impossible.
Euro-zone governments have been seeking a 50-60% reduction in the value of the bond holdings.