The Greek default is making Europe and the markets tremble again. The sovereign debt downgrade of 9 Eurozone countries, by the American agency Standard and Poor's, has gone almost unnoticed on the European squares. Investor fears veer towards the southern Mediterranean and dangerously talks of an imminent bankruptcy of Greece are starting up again. Athens took center stage again on Friday when the private partners, represented by the co-heads of the Greek creditors' committee Charles Dallara and Jean Lemierre, asked the Greek government for a break before resuming negotiations.
By March 20, when 14,5 billion government bonds mature, Greece must find an agreement with private banks, the EU and the Monetary Fund. based onOctober 26 agreement last year, private individuals had agreed to reduce the value of Greek government bonds in their hands by 50% (today equal to 205 billion euros) by voluntarily exchanging them for new bonds. Thanks to this reduction in the value of the bonds (up to a maximum of 100 billion euros depending on the subscriptions to the agreement) a decrease in the Debt/GDP ratio would be obtained from 160% today to 120% in 2020.
Trading has become tumultuous when deciding coupons and maturities for newly traded securities. According to sources cited by Bloomberg, European governments are pushing for 4% coupon value. According to Le Figaro, the Monetary Fund would instead have proposed a 2% coupon. And according to Dallara and Lemierre "the proposals of the Greek government would not have led to satisfactory conclusions". For the Troika (EU, ECB and IMF), the swap is essential for reducing public debt and is a basic prerequisite for receiving further international aid. The new bonds (for a value of 100 billion euros) would be backed by 30 billion euros of high-end collateral guaranteed by the State-saving Fund (EFSF).
The Greek prime minister, Geoge Papademos, this morning immediately tried to calm the waters by assuring that from Wednesday 18 January the Institute of International Finance, an institute that represents all the banks that hold Greek bonds, and the executive will sit again at the negotiating tables and that between 6 and 10 February the government will announce the terms of the exchange offer on the public debt and the new economic programme.
The banks most exposed to Greek debt, represented by the IIF, are the National Bank of Greece, Bnp Paribas, Commerzbank, Deutsche Bank, Intesa Sanpaolo, ing Groep and Allianz.
THEAse index of the Athens Stock Exchange loses 1,06%. just before 16pm.
