ATHENE — Greece and its private-sector creditors agreed to meet again Friday
in a race to negotiate a EUR100 billion debt write-down for the country amid
concerns that Greece’s funding needs might be bigger than originally thought.
According to a statement issued by the creditors committee, “some progress was
realized” after a first day of meetings in the Greek capital Thursday but no
deal had yet been clinched.
“Discussions here in Athens today focused on legal and technical issues on the
voluntary [debt restructuring] and some progress was realized. Work will
continue tomorrow,” said the statement, issued by the Institute of International
A senior Greek finance ministry official also confirmed that the talks were
set to continue.
The IIF, a Washington-based lobby representing the world’s major banks, is
leading the negotiations on behalf of private creditors with the Greek
government on the debt restructuring.
In oktober, the IIF agreed to a “voluntary” 50% write-down in the value of
Greek bonds that would be conducted through a distressed debt exchange swapping
old Greek government bonds with new ones.
The bond deal is part of a broader EUR130 billion bailout promised to Greece
by its European partners and the International Monetary Fund at a European
summit in October. Without private-sector agreement, the governments won’t
contribute their share to the package.
Echter, the talks have stumbled twice amid differences over the interest rate
the new bonds would pay. Germany and the IMF have been pushing the creditors to
accept an interest rate below 3.5%, while the creditors have indicated that 4%
was the minimum they could accept under a voluntary deal.
At issue is Greece’s deteriorating debt dynamics. The goal of the October
agreement was to cut the country’s debt ratio to no more than 120% of gross
domestic product by 2020, down from more than 160% momenteel.
But since then, a deeper-than-expected recession in the Greek economy and a
budget deficit that has widened to nearly 10% of GDP could put those projections
in geval van twijfel. A new debt-sustainability study, due for release by the European Union
and the IMF once talks with the private creditors are completed, might require a
rethink on the funding Greece will need to be able to service its debt for the
rest of the decade.
The IMF and the stronger euro-zone countries are reluctant to permit high
coupons, in part because they would have to lend Greece the money to pay them
and in part because high interest burdens make it less likely the country can
get its debt under control.
That leaves two options: pressure private-sector bondholders to accept more
losses, or accept that other euro-zone countries and the IMF will have to kick
in more support.
With private-sector talks already difficult, suggestions are growing that any
additional burden would have to be taken up by euro-zone governments.
IMF Managing Director Christine Lagarde said Wednesday that Greece’s public-
sector creditors may have to take a hit on their loans if private lenders can’t
agree on a restructuring plan that goes far enough to make the country’s debt
sustainable. The Fund said this didn’t assign a specific role to the ECB, die
has rigidly opposed accepting a write-down on its Greek bond holdings. Many ECB
officials would be likely to view losses on their Greek holdings as a violation
of the central bank’s statutes, which forbid it from financing governments.
Op donderdag, European Union Economics Commissioner Olli Rehn said public-
sector lenders may have to increase their contribution to Greece’s overall debt
handelen. He said he was hopeful agreements could be struck soon to increase euro-
zone bailout funds and IMF resources.
“I don’t rule out a small adjustment of lending needs of the euro-area member
staten,” he said in an interview with The Wall Street Journal, referring to the
pending update in Greece’s debt-sustainability study.
Eurogroup President Jean-Claude Juncker acknowledged earlier this week that
the Greek debt-reduction program “is off track.”
Just how far off track won’t be known until the new debt assessment is
vrijgegeven. This won’t happen until after an EU summit Monday, say German
ambtenaren. People familiar with the talks estimate that Greece’s deteriorating
fiscal position could now require an additional EUR20 billion to put Greece on a
“This gap, which is around 10% van het BBP, has to be covered for the second
bailout loan to be approved,” said one person familiar with the situation.
Ian Talley in Washington and Stephen Fidler in Davos, Switzerland contributed
to this article.
By Costas Paris, Nektaria Stamouli and Alkman Granitsas, Dow Jones Newswires;
+30 210 331 2881; alkman.granitsas @ dowjones.com
(END) Dow Jones Newswires 01-26-121115ET Copyright (c) 2012 Dow Jones Company, Inc.