Wall Street Journal
February 3, 2012
Weeks before deadline, the shape of Greece's coming debt restructuring is still unknown. On the face of it, the Greek government and representatives of bondholders are close to an agreement that they like to describe as voluntary. In fact, a range of debt-restructuring outcomes is still possible—from the truly voluntary to the truly chaotic.
The broad outline of the deal the Greek government is close to agreeing with the Institute of International Finance, led by Charles Dallara, is well-known. The terms include a 50% cut in the face value of existing bonds, an annual coupon on new bonds of below 4%, and guarantees valued at 15 cents on the euro.
Though still the most likely formula, it's not the only result possible. The outcome will not be finally decided in the talks between Greece and the IIF. It must also satisfy Greece's official creditors, including Germany, the main paymaster for euro-zone bailouts, and the International Monetary Fund.
One debt-restructuring expert says Greece and the IIF are in effect "in collusion" over the debt talks. It's in each of their interests to extract as much as possible from Germany and the other official creditors, so Greece gets more cash and the bondholders a richer deal. Germany and the IMF are refereeing the talks, but they take starkly different positions, according to people involved in the negotiations.
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