Si comincia a capire dove andranno a parare..
Europe might force Greek deal on creditors-source
LONDON | Wed Nov 2, 2011 12:16pm EDT
Nov 2 (Reuters) -
Europe is increasingly likely to force investors to take a cut on their Greek bondholdings if they do not voluntarily sign up to a deal to slash the country's debt burden, a person briefed on the negotiations said on Wednesday.
The deal is part of an ambitious plan that was thrown into doubt this week when
Greece said in a shock announcement it would vet the three-pronged agreement through a plebiscite.
A referendum would not necessarily sound the death-knell for the plan however, depending on how the question put before the people was phrased, and had been used in previous restructurings of sovereign debt, the person said.
Athens could squeeze out bondholders by changing the law so that the terms of any untendered bonds would have the same terms as the new ones, if a majority of debtholders -- for instance 75 percent -- voted in favour of the exchange.
Qualms that this would mean the deal with banks would no longer be voluntary, and could trigger a pay-out of Credit Default Swaps (CDS) -- something that Europe has long tried to prevent -- were gradually waning, the person said.
"The Europeans are now looking at the need to devote truly susbtantial financial resources to building firewalls around Spain and
Italy, and therefore they are beginning to pinch pennies," the person said.
"No longer do you hear the statements you heard in May 2010, (that) whatever it takes, we will fund Greece."
Banks represented by the Institute of International Finance (IIF) agreed to write off the notional value of their Greek bondholdings by 50 percent early on Thursday, Oct. 27, after hours of hard-nosed talks with politicians.
The deal with the banks would reduce Greece's debt ratio to 120 percent of its Gross Domestic Product by 2020, but key details determining the cost for banks -- such as the coupon and the discount rate -- are still being negotiated.
There are 206 bilion euros ($282 bilion) of Greek government bonds in private sector hands, and a 50 percent reduction would reduce Greece's debt burden by some 100 billion euros. Its debt to GDP ratio now stands at 160 percent.
The IIF has sounded an optimistic note about the uptake of the agreement it has brokered, saying more than 90 percent of banks will take part, but others have said lead negotiator Charles Dallara was too optimistic.
"I don't know where he gets any of that. The IIF ... does not hold any bonds themselves. I would take all of that with a grain of salt," the person said.
Greece could change its laws, which for the largest part do not contain so-called Collective Action Clauses (CAC) to squeeze out minorities, and introduce an aggregated rule imposing new conditions on outstanding bonds.
"They've not yet come to that point. But you can look down the road and you can see pretty clearly where this thing is going to shake out," the person said.
"It would be a very mild use of legislative power, and obviously far milder than passing a law saying (everything worth) 100 now is (worth) 50."
Resistance against any form of CAC had largely come from the European Central Bank (ECB) and the French government, but these were now also leaning towards their use, the source said: "voluntary has become code word for CAC".
"It is the same meaning of voluntary that would be true if I stepped out on the 38th floor (of my office), I would voluntarily subscribe to the law of gravity. The splat would be the same," the person said.
Europe might force Greek deal on creditors-source | Reuters
