May 31, 2011
A new rescue package for Greece is taking shape, one that would offer billions of euros in fresh loans in return for accelerated privatization and tougher tax collection measures on the part of the beleaguered Greek government.
While the agreement for as much as €60 billion, or $86 billion, would, in theory address Greece’s need for cash this year and next, it puts off for the time being a restructuring, hard or soft, of Greece’s mammoth debt burden.
At the deal’s heart would be an informal understanding that the private sector holders of Greek government bonds might be persuaded to roll over their debts, or extend new loans at the time their older obligations come due.
By taking on more dubious Greek risk — backed by new funds from Europe and the International Monetary Fund — exposed banks would not just step back from the precipice of a “haircut,” or a forced loss on their bonds, they might also hope that in another two years, Greece will be in a better position to repay its debts in full.
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