The council of the eurozone’s economy and finance ministers on Monday increased the pressure on Greece’s private bondholders to accept a significant haircut on the country’s debt, warning that otherwise they would get nothing for the paper they hold.
In Brussels Dutch Finance Minister Jan Kees de Jager told the private sector that it could either take the offer on a 50 percent haircut or the eurozone would go ahead with a forced restructuring -- which would trigger the payout of credit default swaps for Greece.
German Chancellor Angela Merkel warned there would be no bridging loan given to Greece should the negotiations with the private sector miss the all-important deadline of March 20, when a 14.5-billion-euro Greek bond expires.
The so-called “official” sector -- the International Monetary Fund and the eurozone -- is eager to ensure that Greece’s debt becomes sustainable, and, according to sources at the Greek Finance Ministry, the Eurogroup yesterday insisted on the implementation of the October eurozone summit decisions that provide for slashing Greek debt by 100 million euros.
European Union Economic and Monetary Affairs Commissioner Olli Rehn said negotiations on the private sector involvement plan (PSI+) should conclude shortly. “The talks have been moving well on a technical level and I’m certain we will take stock of the PSI talks,” Rehn said.
“I’m confident we can conclude negotiations shortly, preferably in the course of this week.”
The Greek government displayed some reserved optimism, mostly due to the impression that a Greek default would create an earthquake whose shock waves would affect the whole of the eurozone.
“Talks were substantive and constructive,” with the aim of making an official offer by February 13, a Finance Ministry official told Bloomberg. Earlier, Finance Minister Evangelos Venizelos had said, “We are ready to finalize the procedure on time.”
Meanwhile local banks are eagerly anticipating the outcome of talks as their viability will broadly depend on the PSI decisions. Their financial reports, to come out in February, will need to reflect the updated PSI provisions, expected to reach an additional 20 billion euros at least.