London - Arabstoday
Creditors holding over half of the privately-held debt issued by Greece had signed on to a deal to give the country debt relief Wednesday. With less than two days to go, banks and investment funds holding 58 per cent of the face value of the bonds committed publicly to the swap, Bloomberg reported Wednesday. Among the latest to sign on were German reinsurer Munich Re, which holds some €1.6 billion in Greek bonds, and three major Cypriot banks. The euro rebounded a little after touching a three-week low Tuesday, gaining 0.16 per cent to trade at $1.31 US at mid-afternoon. Under the deal, private creditors will swap their Greek bonds for new ones with terms that amount to a 75 per cent cut in value. Greece needs 90 per cent agreement for the deal to work, although if 66.7 per cent voluntarily agree, the remainder can be forced to accept the terms. Whether that forced acceptance triggers complex financial instruments that act as insurance in case of a default is an open quetion. The concern is that triggering those credit default swaps might in itself cause financial panic if some global banks can’t make good on those obligations. Without the deal, which provides for lower rates and longer repayment periods, Greece won’t qualify for a second bailout of €130 billion ($170 billion Cdn) from the European Union and the International Monetary Fund. By March 20, when a €14.4 billion debt repayment is due, it would default, something which may plunge it into financial chaos and reignite the European debt crisis. Greece says that despite the losses, the debt swap is a good deal, since investors would otherwise go empty-handed if the country can\'t secure the second bailout. Investors holding bonds issued under Greek law have until 3 p.m. ET Thursday to decide, while the small portion of those with debt issued under foreign law have until April 11. Greece owes €206 billion ($270 billion) to private investors. The deal would reduce its total €350 billion debt by €107 billion. For a small portion of Greek bonds that have been issued under foreign law, forcing investors to participate is more difficult. In most of those cases, 75 per cent support is required to make the deal binding for all. However, in contrast to the Greek law bonds, the voting for the foreign law bond takes place separately for each individual issue. That means it is much easier for speculators to buy blocking majorities and derail the swap for certain bond issues. Greek finance minister Evangelos Venizelos on Wednesday sharply criticized domestic five Greek social-security funds that decided not to participate in the debt relief. He said the five funds control only about €3 billion worth of Greek debt but accused them of \"undermining\" the national effort to secure the deal. \"What kind of message are we Greeks sending?\" he told private Real FM Radio. \"Is our message that we prefer the country to go bankrupt and the social security funds\' bonds to be totally wiped out? If (the bond swap) does not succeed, what will these bonds be worth? They will be worth a big zero. Because the country will have been wiped out.\"