Greece announces biggest debt overhaul in history, wards off disastrous default—for now

by Alex Ballingall

In yet another careful step away from the financial precipice, Greece announced at dawn that it had clinched a deal with its bondholders that will see the biggest debt overhaul in history. The deal means holders of Greek bonds will take a loss in order to allow the government to change its repayment plans. Greece will thereby reduce its crippling debt load by more than 100 billion euros ($130 billion).

“I wish to express my appreciation to all of our creditors who have supported our ambitious program of reform and adjustment and who have shared the sacrifices of the Greek people in this historic endeavour,” said Greek Finance Minister Evangelos Venizelos in a statement today.

The deal, which required the support of at least 66 per cent of private bondholders (who end up with about 83 per cent of the face value of their investment), was crucial since it was a precondition to receive a second massive bailout from the European Union and International Monetary Fund, this one worth $170 billion. In 2010, the EU and IMF agreed to funnel $143 billion to help Athens balance its books.

This doesn’t mean Greece is out of the dark. The country’s economy is still in tatters, with austerity measures—as demanded by the country’s international creditors—cutting back consumer purchasing power and contributing to massive unemployment. Greece’s youth unemployment rate, concerning people under 25, is at a staggering 51 per cent. You can bet that the race towards this debt overhaul won’t be the last bit of economic brinkmanship you read about in Greece.

 




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Greece announces biggest debt overhaul in history, wards off disastrous default—for now

  1. How, exactly, would the default be disastrous?

    And for who?

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