Options for holders of Greek bonds

Financial Times
June 14, 2011

1. Voluntary rollover of bonds at maturity

Very informal at member state level

Advantages:
● Lessens risk of a credit downgrading for Greece
● Lessens contagion risks linked to a more coercive operation

Disadvantages:
● Early participants have little assurance that bondholders with later maturities will ultimately meet their commitments – a significant disincentive
● Private sector contribution cannot be estimated in advance

2. Voluntary rollover with limited positive incentives

More formal and centralised

Advantages:
● Balances broad participation of private creditors with avoiding a downgrade for Greece
● Commitments to rollover are formalised in public statements and bilateral letters
● Private sector contribution can be estimated in advance

Disadvantages:
● No guarantee of high participation rate
● Higher risk of a credit rating downgrade to default for Greece ● Correspondingly higher risk of contagion to other member states
● Period of default status for Greece could be protracted

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