ATHENS: Greece raced Friday to clinch a debt deal with private creditors ahead of a eurozone meeting as it opened talks with EU-IMF bailout partners on a new loan to avert a March default.
Prime Minister Lucas Papademos met again with global private bank group representatives after late-night talks on Thursday as his finance minister held talks with senior EU-IMF auditors on a new eurozone rescue loan.
Finance Minister Evangelos Venizelos said talks with bank officials would continue into the evening and that eurozone finance officials would hold a teleconference in the meantime.
“We will continue around 1730 GMT,” Venizelos told reporters after a meeting with negotiators from the International Institute of Finance, a group representing some 450 private institutions worldwide.
“There will be a teleconference of the euro working group in the meantime,” the minister said.
A government spokesman earlier noted that Greece is “in a very critical negotiation happening in a very short timeframe.
“We hope it will conclude very soon,” government spokesman Pantelis Kapsis told private Radio 9.
The Athens stock exchange opened with small gains on Friday and held up by around one percent in midday trading.
Greece is seeking to slash around 100 billion euros ($129 billion) from its huge debt through a voluntary bond swap with creditors, a process that would unlock a new eurozone rescue package worth 130 billion euros overall.
Athens wants an outline of the deal to be ready by Monday, when eurozone finance ministers meet, and a full agreement by January 30 when the European Union will hold a summit.
“By next Monday, at the (EU) summit, we must have a final framework for the new (loan) programme, not just for the (bond swap),” Venizelos told parliament on Thursday.
Greece has a looming loan repayment worth 14.3 billion euros on March 20 which it cannot honour without financial assistance.
“If there is a gap, the gap will have to be filled through a larger contribution of the official sector, namely eurozone states, either directly or indirectly,” Venizelos said, noting that there was “no particular willingness or readiness” to do so.
“There must be no gap,” the minister said.
Athens hopes to draw 89 billion euros from the rescue package next month to meet payment needs and recapitalise Greek banks hit by the debt swap.
Under the so-called private-sector initiative (PSI), banks and other financial institutions are expected to take at least a 50 percent “haircut” on their Greek debt, which would remove about 100 billion euros from Athens’s massive debt burden of more than 350 billion euros.
The talks have hinged on the interest rate to be offered for new bonds that will replace the maturing debt that is being written down.
A deal seems close on a flexible rate of around four percent, Greek newspapers said on Friday.
In a sign that an agreement is at hand, the International Monetary Fund on Thursday said it was ready for talks on extra rescue funds needed to keep Athens from defaulting in March.
Hedge funds holding Greek debt have resisted the writedown and are reportedly planning an appeal to the European Court of Human Rights over the issue.
Greece has warned it could pass legislation to force holdouts to join the bond swap through collective action clauses (CACs), a move that may trigger claims by creditors for default compensation.
However ministers have stressed they would prefer a voluntary deal.
“It must be of a voluntary nature and lead to complete participation, namely 100 percent participation,” said Venizelos.
He noted that all bondholders had to participate for the operation to produce to achieve the 50 percent reduction in the value of the debt held by private creditors.
A successful conclusion to the talks would also enable the stricken eurozone member to hold early elections, expected in April, to replace an uneasy political coalition supporting the present temporary government.
The Friday meetings with senior representatives from the European Union, the IMF and the European Central Bank — known as the ‘troika’ — will focus on the next three years of an economic blueprint adopted by Greece in return for the 130-billion-euro eurozone bailout, and an earlier loan in May 2010.
Greece is under pressure to revise its private-sector wage agreements to reduce labour costs and improve competitiveness.
Greek unions say such a measure would only exacerbate a deep recession brought about by two years of austerity measures already adopted under the EU-IMF economic adjustment plan.
Models Greece can use to have multiple incomes
Even North Korea can be saved, so I do not think Greece is such a challenge if it adopts models which Singapore uses in its pioneering days to have multiple incomes by setting up reforms that mimick the use of Government Linked Companies like CPF, EDB, HDB etc that will drive GDP growth to the maximum, study the good but discard the bad and be creative to adapt to solve your own problems, however when that is achieve it needs to reconsider it’s options and by having sustainable growth, it’s balance with social responsibility, only with a plan in place can investors be assured as they have witnessed the historic rise of Singapore. Austerity measures are needed to contain government debts to a sustainable level but after that, the creation of wealth will have a multiplier effect to resolve problems, it is short term pain for long term gain, and with the IMF involved with private equity, Greece is now in good hands.
– Contributed by Oogle.
Greek Debt-Swap Accord ‘Coming Into Place’
By Marcus Bensasson, Natalie Weeks and Maria Petrakis –
Greece and its private creditors said early today they had made progress during talks in Athens on a debt-swap accord needed to lower the country’s borrowings and clear the way for a second round of international aid.
“The elements of an unprecedented voluntary private-sector involvement are coming into place,” according to an e-mailed statement from Charles Dallara, managing director of the Institute of International Finance, a Washington-based lobby group representing creditors negotiating with the government.
European officials and the nation’s private bondholders agreed in October to implement a 50 percent cut in the face value of Greek debt by voluntarily exchanging outstanding bonds for new securities, with a goal of reducing Greece’s borrowings to 120 percent of gross domestic product by 2020. An accord with bondholders is key to a second financing package for the cash- strapped country, which faces a 14.5 billion-euro ($18.7 billion) bond payment on March 20.
“Now is the time to act decisively and seize the opportunity to finalize this historic deal and contribute to the economic stability of Greece, the euro area and the world economy,” Dallara said in a joint statement with Jean Lemierre, a special adviser to the chairman of BNP Paribas SA. (BNP)
Greek Finance Minister Evangelos Venizelos told reporters in Athens talks will continue later today, after a 4 1/2 hour meeting with the IIF officials and Prime Minister Lucas Papademos broke up about 1 a.m. in Athens. The meeting reconvened late yesterday after Greek officials broke to consult with European Union representatives.
“There’s been significant progress,” Hans Humes, president of Greylock Capital Management and a member of the creditor committee, said in a Bloomberg Television interview yesterday. “There’s broad agreement about the coupons and structural elements.”
The parties are near an initial agreement under which old bonds would be swapped for new 30-year securities carrying a coupon that would begin at 3.1 percent, reach 3.9 percent and go as high as 4.75 percent, Athens-based newspaper Proto Thema reported on its website yesterday, without saying where it got the information.
The two sides, which broke off negotiations on Jan. 13 before resuming them three days ago, have struggled to reach an accord on the coupon and maturity of the new bonds, which would determine losses for investors.
Humes said he’s “cautiously optimistic” the talks will lead to an accord.
Weekend Deal ‘Optimistic’
“If the IIF shake hands with the other side of the table, we will have a 90 percent or higher acceptance rate,” he estimated. He declined to provide details of the discussions.
Marathon Asset Management LP Chief Executive Officer Bruce Richards estimated in a Jan. 17 interview that private creditors were likely to get cash and securities with a market value of about 32 cents per euro of government bonds in the debt accord.
Like Greylock, Marathon, which has $10 billion under management, is on the committee of 32 private creditors formed in November to negotiate with Greece, the International Monetary Fund and the EU. The firms aren’t members of the smaller steering committee directly involved in negotiations.
Questions remain how the two sides can craft a voluntary deal that will provide the debt relief the Greek government requires while attracting enough participation from bondholders. The government has indicated it may submit legislation that would compel full participation from private creditors, a move that would undercut the voluntary nature of any deal and could trigger credit-default swap insurance contracts.
‘Pretty Much Set’
“The financial terms are pretty much set at this point,” Sassan Ghahramani, CEO of SGH Macro Advisors, told Lisa Murphy on Bloomberg Television’s ‘Street Smart’. “The whole holdup now are on legal issues, and I suspect there’s some discussion on this whole collective action clause issue.”
Venizelos said on Jan. 19 that for the final deal to lead to a sustainable level of debt for the country there must be a 100 percent participation rate.
Hedge funds holding Greek bonds may resist the deal, seeking greater profit by getting paid in full, either by the Greek government or by triggering payouts from credit-default swaps. Winning support from banks seeking to limit their losses may be easier than including hedge funds and other speculators who bought securities at distressed levels.
Vega Asset Management LLC resigned from the committee of Greek creditors negotiating the debt swap last month because the Madrid-based hedge fund refused to accept a net present value loss exceeding 50 percent, according to a Dec. 7 e-mail sent to other panel members, which was obtained by Bloomberg News.
Greek officials also met with the so-called troika mission, which is comprised of European Commission, European Central Bank and IMF representatives, on the new 130 billion-euro financing accord for the country.
The creditors’ steering committee negotiating the debt swap includes representatives from banks and insurers with the largest holdings of Greek government bonds, including National Bank of Greece SA, BNP Paribas SA, Commerzbank AG (CBK), Deutsche Bank AG (DBK), Intesa Sanpaolo SpA (ISP), ING Groep NV (INGA), Allianz SE (ALV) and Axa SA. (CS)
Financial firms on the IIF’s private-creditor investor committee, a larger group of 32 members that includes the smaller steering committee, hold more than 47 billion euros in Greek sovereign debt, according to data compiled by Bloomberg from company reports.
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