Debt agony in climax

It seems that the arrival of the head of IIF Charles Dalara in Athens and the meeting with Evangelos Venizelos is postponed for Thursday.

The government is anticipating the latest information and estimates of the …"commander of the haircut" on Greek bonds, from the markets front, on both sides of the Atlantic. His suggestions will largely determine the future of the rescue plan for our country.

Even though Dalaras’ visit seems to certify the high mobility around the implementation of the PSI, markets are greatly concerned and the signals toward the Greek government are a bit hazy. The draft by EU, IMF and IIF bears a cut by 100 billion euros, which those who hold Greek bonds will have to accept they will lose, in the voluntary exchange of bonds agreed at the October summit.

According to information, some hedge funds seem to strongly react to the possibility of participation in a voluntary restructuring of the Greek debt because they have already bet a lot in the bankruptcy of our country.

The major asset in the hands of those that support the solution brought by the IIF, is that those who have "bet" that Greece will not repay its debts, which would mean the activation of hedging contracts (CDS) - keep paying money for two years, but to no avail. And they are in danger of losing a lot, while the other lenders seem to accept a sensible haircut of the Greek debt, so as not to lose everything.

But it is a lot of money for the funds that have bet on Greek CDS and there is a risk they can derail the European bailout plan of Greece. The hedge funds are planning not to join the exchange program and would prefer to contribute to the bankruptcy of the country to collect from the risk premiums they have purchased. While others might hope they will ensure their full repayment at 100%, if other, more willing bondholders, accept to lose about 50%.

And if there is no final agreement on this issue, then the IMF, the EU and the ECB will not be able to forward the second bailout package of Greece.

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