Debt anxiety reaches climax

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

The government is anticipating the latest information and estimates of the …"commander of the haircut" on Greek bonds, from the market 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 reflect 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 the EU, the IMF and the IIF bears a cut of 100 billion euros, which those who hold Greek bonds will have to accept they will lose in the voluntary exchange of bonds agreed upon at the October summit.

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

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 be accepting 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 for Greece. The hedge funds are planning not to join the exchange program and would prefer to contribute to the country's defaulting 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 agree 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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