Greece is inching towards a debt swap deal with bondholders and has until Thursday at 10 p.m. Athens time to finalize it. The overhaul requires the government to shave $141 billion off Greece’s debt. Failing to do so would likely trigger Greece’s exit from the euro zone, not to mention a deeply damaging default.
Thankfully, Greek officials are “optimistic” that an agreement will be reached in time, since 60 per cent of bondholders have already agreed to the haircut, which will see them lose more than half the value of the bonds they hold. Under Greek law, if 66 per cent of bondholders agree to the overhaul, the government can pass collective action clauses that will force all holders of bonds to accept the losses. Finance Minister Evangelos Vinezelos expects that to happen. “Whoever thinks that they will hold out and be paid in full is mistaken,” he told Reuters on Monday.
It’s a weird message for a finance minister to send, that anybody who invests in our country better expect to lose money. But these are strange and dire times for the Mediterranean country.
Thursday, March 8, 2012