December 20, 2011
Greece may complete a debt-swap agreement with creditors soon, paving the way for more international financing needed to prevent economic collapse.
“We are close to an agreement on PSI” -- or private- sector involvement, Finance Minister Evangelos Venizelos said in a speech in Athens today. “I believe this. And it is feasible if our partners respect the accord of Oct. 26 and Oct. 27.”
Greece’s debt is forecast to balloon to almost double the size of its shrinking economy next year without a write-off accord with investors, the International Monetary Fund said Dec. 13. The swap, part of a 130 billion-euro ($170 billion) second bailout agreement for Greece, is supposed to help reduce its debt to 120 percent of gross domestic product by 2020.
The country’s 206 billion euros of privately held debt would be reduced by 50 percent under an agreement announced at an Oct. 26 summit of European leaders in Brussels.
The government and bondholders reached an initial agreement on some of the terms of a swap at meetings in Paris last week, website Euro2day reported today, without citing anyone. They agreed the new bonds would be governed by British law and that they would contain clauses for greater returns if economic growth outperforms projections, the website said.
Bondholders have proposed the new notes carry a coupon of 4 percent for the first three years, 4.5 percent for the next five years and 5 percent thereafter, the website said. No agreement has been reached on that proposal, Euro2day said. That proposal means an effective net present value loss of 65 percent, the website said.
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