Wall Street Journal
January 12, 2012
The negotiations over Greece’s debt restructuring, which continue tomorrow in Athens, are a real head-twister, a six-sided game of Chinese checkers, European-style. Here’s our guide through the strategic thrusts and parries.
There are, roughly, six groups with interest in the “PSI” talks, which are going on this week. They are: northern euro-zone governments, southern euro-zone governments, the European Central Bank, the International Monetary Fund, Greece’s creditors and Greece itself.
The deal
The deal on the table involves persuading creditors to turn in their bonds and receive new ones that mature many years in the future, and have half the face value. The Greek authorities say €206 billion of bonds are subject to the exchange; if all the creditors agree, they’d get €103 billion in new bonds back.
On Oct. 27, the euro-zone leaders agreed they’d put up €30 billion to fund some sort of sweetener to encourage bondholders to take the deal. This could come in the form of collateral–say, AAA bonds–set aside in escrow to guarantee partial repayment of the new Greek bonds issued in the exchange. Or, it could be a simple cash payment to bondholders. For instance, a holder might surrender a €100 Greek bond and get in return a €35 new bond and €15 in cash. (Greece would, of course, now owe that €15 to the euro-zone countries in some form or another.)
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