New Effort Focuses on Bigger Greek Write-Down

Wall Street Journal
October 11, 2011

Efforts to resolve Greece's financial crisis now are focusing on asking banks to take a major write-down on their holdings of Greek government bonds.

These write-downs, or "haircuts," could range between 40% and 60% depending on the modality used, people with direct knowledge of Greece's talks with European governments and the International Monetary Fund say. The question remains whether European governments and the European Central Bank also will have to accept losses to provide Greece with debt relief.

On Tuesday, Greece's international creditors—the International Monetary Fund, the European Commission and the European Central Bank—cleared the way for Athens to receive another slice of aid needed to stave off a Greek default. The announcement came a day after the so-called troika wrapped up their latest review of the country's finances and economic plans.

Now, "the discussion is on a haircut, how big it needs to be and whether sovereign creditors may be involved," said one senior official with knowledge of the situation. This official said Greece's debt load has come to be seen as unsustainable.

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