With PSI deal done, onus is on ECB

The deal on private sector involvement (PSI) in the Greek debt swap has been all but concluded, with the group representing the majority of private creditors meeting on Thursday to fine-tune the details. At the same time a question mark still hangs over the possible participation of the European Central Bank.

A spokesman for the Institute of International Finance, Frank Vogl, announced on Wednesday that the private creditors’ group will convene in Paris today to discuss the technical details of the offer Athens is preparing. The IIF is prepared to accept an average interest rate of 3.6 percent on the new 30-year bonds, according to sources.

Rating agency Standard & Poor’s warned on Wednesday that even a 70 percent haircut would not suffice to render the Greek debt sustainable without the participation of the official sector. Questions remain over the possible involvement of the European Central Bank in the bond haircut, as Reuters on Wednesday reported that some of the 23 ECB board members retain reservations and the final decision will be made next week.

Also on Wednesday, the deputy chief executive officer of the European Financial Stability Facility, Christophe Frankel, said the fund will “probably” be involved in the debt write-down. “We are now waiting for the” private sector involvement and the “new program for Greece to be finalized,” Frankel said at a conference in London. “The EFSF will probably play a significant role in both.”

German Deputy Finance Minister Thomas Steffen said euro-region governments are working toward getting Greece’s private creditors to treat a March 20 bond redemption as part of the PSI to help the country return to sustainable public finances.

“Our goal is that Greece will not have to repay the 14.5-billion-euro tranche on March 20, but that this tranche will already be part of the private sector involvement,” Steffen said on Wednesday in a speech in Berlin. “That is what we are working on and that results in our ambitious schedule.”

Meanwhile German daily Die Welt reported on Wednesday that German taxpayers may face at least 25 billion euros in losses on Greek sovereign bonds, citing its own calculations and those made by the IfW economic think tank.

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