Greek bondholders gear for tough talks
Published:Wednesday | January 25, 2012 | 12:00 AM
The representative of Greece's private bondholders has warned that Europe's stability is at stake if a deal to restructure the country's debts fails.
Speaking at a press conference Tuesday, the Institute of International Finance's managing director, Charles Dallara, says he is confident there would be "large-scale" participation if a voluntary deal between Greece and its private creditors is agreed.
He said the proposals tabled by the private creditors are in line with the commitments made by European leaders at their summit in Brussels in October when they backed efforts for Greece to reduce its private-sector debt by around €100 billion ($130 billion) through a bond swap.
A deal has so far failed to be agreed because of differences over what interest rate Greece should pay on its new bonds.
Europe and private investors were gearing up for hard negotiations on how to cut Greece's massive debt Tuesday after the region's finance ministers adopted a tough stance on how much rescue money they would pump into the Greek economy.
On the front line of Europe's sovereign debt crisis, Athens is trying to get its private creditors - banks and other investment firms - to swap their Greek government bonds for new ones with half their face value.
The new bonds would also push the repayment deadlines 20 to 30 years into the future.
However, the main stumbling block over the past few weeks to securing this deal has been the interest rate these new bonds would carry.
In the early hours of Tuesday, politicians representing the 17 countries that use the euro as their currency drew a firm line on the Greek debt restructuring.
Jean-Claude Juncker, the Luxembourg prime minister who chaired a meeting of finance ministers on efforts to fight the crisis, said the average interest rate over the lifetime of the new Greek bonds must "clearly below 4.0 per cent," with an average rate of less than 3.5 per cent for the period until 2020 - far below the 4.0 per cent demanded by the Institute of International Finance.
- AP