Monday, January 31, 2011

Greece in talks to avoid sovereign default

Financial Times
January 30, 2011

Greece is in talks with the European Union and International Monetary Fund on a debt restructuring package aimed at averting a possible sovereign default.

The proposal would enable Athens to borrow up to €50bn ($68bn) from the eurozone’s bail-out fund, the European financial stability facility (EFSF), to buy back bonds at about 75 per cent of face value. At the same time the maturity of Greece’s €110bn rescue loan from the EU and IMF would be extended to 30 years and the interest rate reduced below the current 5.5 per cent, according to bankers with knowledge of the talks.

“Formal contacts on the package are under way but they’re at an early stage,” one banker said at the weekend. However, such a deal, particularly the EFSF loan and the extension of the payment schedule, would need approval from eurozone heads of state, and there are signs Germany is against such uses of the EFSF.


1 comment:

Diran Majarian said...

If Simon Johnson's benchmark of 50% debt/ GDP is correct to return Greece to sustainable debt levels, GAP and Pap are way over their heads with little real understanding of the mess that they are in. They are taking a poor negotiating position. Even if they got what they are asking, probably it would just keep them over temporarily. Like all Greek governments the last 30 years, they are digging their grave. Unfortunately, Greek politicians know only how to squander public money and destroy value.