PSI hailed by foreign creditors, prompts release of 35.5 bln euros

Greece’s successful bond swap with foreign investors has been welcomed by foreign creditors, with eurozone finance ministers agreeing to release 35.5 billion euros of aid for Greece. The ministers, who reached their decision during a conference call on Friday ahead of a scheduled summit in Brussels on Monday, approved the release of up to 30 billion euros to be given to bondholders as a sweetener with another 5.5 billion euros for outstanding interest payments. The ministers also gave the green light for the activation of collective action clauses, imposing losses on bondholders trying to avoid a haircut. Eurogroup chief Jean-Claude Juncker said the successful PSI deal paved the way for the approval of a second Greek bailout. “The necessary conditions are in place to launch the relevant national procedures required for the final approval of the euro area’s contribution to the financing of the second Greek adjustment program,” he said. German Finance Minister Wolfgang Schauble said that the remaining 94.5 billion euros of the second rescue package to Greece would probably be released next week. “There is no doubt that we will be able to decide on the release of the second Greece package next week,” he said. Schauble added, however, that Greece was not out of the woods yet. “It would be wrong to give the impression that the crisis is over,” he said, adding that Greece has an “opportunity to tackle the crisis and should use it.” European Economic and Monetary Affairs Commissioner Olli Rehn claimed to be “very satisfied” with outcome of the PSI, which he described as “a decisive contribution to financial stability in the euro area as a whole.” The head of the International Monetary Fund, Christine Lagarde, was also upbeat. “This is an important step that will dramatically reduce Greece’s medium-term financing needs and contribute to debt sustainability,” she said. French President Nicolas Sarkozy, who is in the middle of an election campaign, was even more reassuring. “The Greek problem is solved, we have turned a page in the financial crisis,” he said. One negative reaction, which was anticipated, was the decision by Fitch Ratings to downgrade Greece from “C” to ”restricted default.” 

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