June 25, 2011
European officials have persuaded Greece’s politicians to squeeze more tax dollars out of the rich, the poor and even themselves. Now they have to prevent the country’s bondholders from pulling their money and running for the exits.
In a continent-wide series of sensitive talks over the next week, finance officials in Germany, France and other European countries will try to coax banks, pension funds and others who hold Greece’s bonds to keep their money invested in a nation regarded as an increasingly poor risk.
Reminiscent of the discussions held in Uruguay, Mexico, Turkey and other nations that have had to navigate debt crises, the negotiations this time are being held in the executive suites of Frankfurt, Paris and other financial centers of the developed world.
The talks with private sector investors are a critical step in addressing Greece’s renewed crisis, and if they fail to produce the intended results — perhaps $30 billion or more in commitments from private investors to keep their money in place — a tentative financial plan for the country could unravel. Ratings agencies are watching, and have said they will declare Greece in default if it appears that investors are being forced to buy new Greek bonds or accept losses on their existing ones, instead of the “voluntary” participation promised by European leaders.
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