Bondholders demand Greek growth plan

Financial Times
October 22, 2011

Bondholders are prepared to take higher losses on their Greek debt, but they are far from a deal with European governments.

The Institute of International Finance, which represents the largest holders of Greek debt, says it is only prepared to strike a deal if it is accompanied by a credible plan to return the Greek economy to growth in order to reduce its dependence on European taxpayers and on private sector losses.

“Talks over Greek debt are continuing, but we are nowhere near an agreement,” Charles Dallara, managing director and chief negotiator for the IIF, said in an interview on Saturday.

Mr Dallara’s hardline stance comes a day after government lenders said Greece’s economy had deteriorated so severely that bondholders must accept a 60 per cent cut in the value of their holdings in order to bring the second Greek bail-out back to the €109bn agreed in July. The report made clear European leaders would push Mr Dallara to accept losses far beyond the 21 per cent “haircut” agreed in July.

“It has got to increase massively,” Jean-Claude Juncker, the Luxembourg prime minister who chairs the group of eurozone finance ministers, told the FT.

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