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Greek bonds swap is extended until 2024

10 August 2011 / 13:08:27  GRReporter
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A Greek banker, quoted by the Reuters news agency, has reported that the European Commission and the Institute of International Financial are considering extending the repurchase of Greek bonds maturing from 2020 to 2024. The extension of the terms of the Greek bonds swap will greatly facilitate the government of George Papandreou, which hopes to transfer of 90 per cent of the value of the new bailout to its private creditors. According to some local economic editions, € 70 billion are guaranteed from private banks and insurance funds are expected to contribute too.

According to other sources, however, there are two obstacles in the Greek government plans for the emergency activation of the expected roll-over. The first is the observed delay in the launch of the permanent European Financial Stability Facility, which has been agreed at the summit on July 21. As the Finance Minister Evangelos Venizelos was officially informed, it would be very difficult for the countries with high credit rating of AAA, such as Germany and the Netherlands, for example, to convince their parliaments to approve the new bailout for Athens. These countries are anyway very reluctant to participate in the secondary market for government securities. The latest Forsa Institute survey shows that 52 per cent of the members of the ruling German Christian Democratic Union of Chancellor Angela Merkel is against the country's participation in the rescue of the Greek economy and only 42 per cent support it.

One of their most serious argument is that most of the countries participating in the second bailout for Greece borrow money from the capital markets at interest rates one or two per cent higher than those at which Greece obtains the loans. To be able to rely on the second bailout, Athens will have to implement the agreed privatization program and spending cuts in the public sector in full. The heads of the supervisory Troika, who will arrive in Athens on August 16, will assess how it fulfills its obligations. In September, they will present their report to the parliaments of the European Union states, which in turn will have to decide whether to engage in the new bailout for Greece.

Tags: Greek bonds swapPrivate creditorsBanksFinancial Stability Facility
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