Galery

1

Victoria Mindova

The credit rating agency Fitch kept its word and lowered the credit rating of Greece to "restricted default". It had warned earlier this year that it would do so after the triggering of the PSI and the collective action clause. The end of the announcement of "voluntary" participation in the restructuring of the Greek foreign debt did not have a good effect on the Athens Stock Exchange, which ended with a 2.15% decline. The main index of the Greek stock market fell to 752.35 basis points, the daily turnover reached 81.7 million euro, and banks lost 4.26%.

Meanwhile it became clear that the second contract for assistance to Greece will be signed on the 14^th of March, 2012. The first instalment of the package will be for the amount of 35.7 billion euro and will deposited in the Greek account before the 20^th of March this year. At a press conference Finance Minister Evangelos Venizelos officially announced the results of the application for voluntary participation of private creditors in the debt cuts. The participation of local investors reached 152 billion euro of the total 177 billion euro in Greek government bonds. After triggering the collective action clause (CACs) owners of bonds worth 5.3 billion euro have voted against. The decision about the CACs will be taken by the end of the day after the extraordinary meeting of the Finance Ministers of the eurozone Eurogroup, who must initiate the process of allocation of aid after the announcement of the results of the voluntary participation.

The second category includes those bonds, acting under foreign law depending on the origin of the investors. They hold Greek debt worth a total of 17.4 billion euro, out of which currently bonds worth 12.3 billion euros have announced voluntary participation in the PSI. The third type of Greek bonds, which are subject to exchange, are those that have been given as guarantees for loans to support unprofitable state enterprises. The total value of these contractual loans is 9.8 billion euro, out of which 7 billion euro will participate in the exchange.

The government decided to postpone the deadline for voluntary participation in the PSI for those investors from the latter two groups who are still hesitating. In other words, some time has been given for reflection for the holders of bonds worth 5.1 billion euro, acting under foreign law and for the holders of bond guarantees worth 2.1 billion euro to accept the offer of Greece. For the moment, the final result of the PSI is that bonds worth 197 billion euro will be cut voluntarily from the 206 billion euro debt held by private investors.

Finance Minister Evangelos Venizelos described the PSI process as an "incredible success". He stressed that under his supervision future generations of Greece will be relieved from debt of about 100 billion euro. Contrary to most international economists, Venizelos is confident that the expected result for the Greek debt to be 120% of the GDP in 2020 will ensure the sustainability of the economy in less than 10 years. This statement contradicts even the norms established by the European Union because it is twice as high as  the Maastricht criteria for the ratio of foreign debt to GDP of a Member State of the Union.

Expect further details on the decision of the International Association of swaps and derivatives for the activation or (not) of the insurance on Greek government bond CDS.