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Victoria Mindova

Europe supports us and we are fully protected by the new rescue package, said the Finance Minister of Greece Evangelos Venizelos after the adoption of the program for the assimilation of the debt crisis in Brussels. Greece received 158 billion euros aid by the year 2020. 109 billion euros is the package from the eurozone countries and the International Monetary Fund. Another 38 billion euros will come from the share of private owners of Greek government bonds and about 12 billion euros will be saved through switching to bonds with new ones that have a value lower than the face value.

Greece could not escape from pruning part of the foreign debt and part of the bonds maturing by 2020 will be replaced with new bonds with 30-years maturity period and with value equal to 80% of the nominal value. Credit rating agencies have warned that if such a plan is put into operation, they will announce the bankruptcy of Greece. Venizelos seems to have accepted this perspective with some indifference and the extraordinary press conference after his return from Brussels, he said: "No negative reaction and evaluation will have any effect on us because we are already protected."

The world continues to go ahead, and despite the apparent calm behavior of the Greek political leaders we are now looking forward to the assessment of the International Swaps and Derivatives Association (ISDA). The organization will decide whether the second program is a threat to investors and will determine whether the new conditions for Greece's debt crisis will cause a credit event. Finance experts of the association are expected to give their opinion on whether the consequences of the new rescue program will be evaluated as a controlled bankruptcy (selective default) and whether it will trigger the insurance market for Greek government bonds CDS.

On this issue, Venizelos made it clear that whatever ISDA decide, Greece has the support of the counries from the eurozone and that he is not afraid of the term "bankruptcy". Furthermore, he stressed that the Greek banking system is the most secure and stable in Europe today. "After accepting the offer made at the summit, their liquidity is secured hundred per cent by the European institutions and European Financial Stability Fund (EFSF)", boasted Venizelos. He described the results of the latest stress test of the Greek banks as satisfactory and stressed that they will continue to hold high capitalization, which will correspond to 10% according to the indicator Tier1.

At the same time, the foreign debt will be restructured and the average maturity of the overall package of bonds will be extended to 13.5 years instead of the 6.5 years at present. A second extension of the payments of the aid package of 110 billion euros from Memorandum 1 is also provided. Greece has already assimilated 65 billion euros of this money and the eurozone countries and the IMF agreed to reduce the interest rate on the aid loan to about 4% from the current approximately 5%. Furthermore, they agreed to a grace period until 2016, until when the country will not have to repay any interest or principal on the money from Memorandum 1.

A second grace period is set for the new financial package of 109 billion euros, which will run until 2020. The interest rate for this package will not exceed 3.5%, which especially pleased the Greek statesmen who got used to see the interest rates on government loans being over 5% in the last year and a half. At the same time Venizelos did exclude the option in the process of reforms and restructuring to take part more private owners of Greek government bonds, who will voluntarily changed part of the debt with new securities with a reduced nominal value and for a longer period of time. Trimming the value of the bonds will not exceed 20% and will be done only with the consent of the private owners. In this process is expected to take part 90% of the private savingt funds and banks that hold about 135 billion euros in Greek bonds. Public pension funds that also have significant stocks of Greek government bonds will replace the old bonds with new ones with 30-year maturity period, but at their full value without pruning.