Saturday 25 November 2017

Private sector weighs in behind Greek debt solution

Luke Baker

NEGOTIATIONS between Athens and its private creditors on restructuring Greece's debt could wrap up as early as tomorrow, bankers and officials said, but European Central Bank action to further reduce the burden is now seen as imperative and is proving a sticking point.

Banking sources and officials in Athens and Brussels said the private sector talks were on the cusp of being concluded, with banks and insurance companies ready to accept around a 7pc net-present-value loss on the bonds they hold, reducing Greece's debts by around €100bn.

Greek Finance Minister Evangelos Venizelos said the loss could even exceed 70pc. Despite that scale of writedown, however, officials said it was unlikely to be sufficient to reduce Greece's debts to 120pc of GDP by 2020, the goal agreed with the IMF to make the debt pile sustainable.

Instead, there is a growing awareness of the need to involve public sector owners of Greek bonds -- the ECB and national eurozone central banks -- in the restructuring, European officials and bankers said.

"The analysis is being done right now to see what steps the official sector can take in reducing Greece's debts," one EU official said.

"The goal is to get the debt-to-GDP down to 120pc, but even with PSI it's still substantially above that, so there needs to be official sector involvement."

A senior banking source with knowledge of the talks said there was a common understanding that private sector involvement would not work without the official sector taking a hit as well, adding: "We're talking about the 'how' now."

ECB sources said last week that the ECB had paid €38bn to buy Greek bonds with a face value of €50bn over the past year or more as part of its controversial bond-buying programme to prop up Athens.

Even if the private sector's role in reducing Greece's debts is concluded today -- following nearly seven months of on-off talks -- it could still take several days before there is any resolution to the official sector participation.

Time is running short. A deal on restructuring Greece's debt is needed by mid-February if Athens is to avoid missing a €14.5bn debt repayment in mid-March, which will force a default. (Reuters)

Irish Independent

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