ATHENS, Greece – Greek officials launched talks with international bankers Thursday on the details of a complex plan to restructure the loan-dependent country’s privately held debt under a new bailout deal.
Finance Minister Evangelos Venizelos said the Athens negotiations started “in a most encouraging manner.”
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“We have started (the talks) and will conclude very soon because we face specific bonds maturing in August and September and want either to have finished before that or to have formulated a transitional framework until we have finished,” Venizelos told parliament.
Last week, European leaders agreed on a second bailout for Greece worth a total €109 billion ($155 billion) – on top of a €110 billion deal in 2010 – to protect the country from looming default and ease its massive debt burden.
The agreement called for banks, pension funds and other private institutions that hold Greek debt to voluntarily swap their bonds for new ones with lower interest rates or slightly smaller face value.
On Thursday, the French finance ministry said local lenders will participate with all their Greek bonds that mature by 2020, worth “about €15 billion.”
Provided overall private sector participation meets a targeted 90 per cent, the swap will involve some €135 billion worth of bonds that mature by the end of 2020, with bondholders taking a net 21 per cent loss.
“We want the process to be immediately implemented and we want the duration of its implementation to be the shortest possible,” Venizelos said.
Greece is unable to borrow from international money markets as the interest rates currently demanded exceed 15 per cent, with its bonds designated barely above the level of default by all three major international ratings agencies.
The duration of the bond swap process is crucial, because for that period Greece will most likely be rated in default – a humiliating first for a country using the euro.
However, provisions in the bailout that secure Greek banks’ credit lines mean the default rating should have limited practical repercussions.
“There will be no problem for Greek banks,” Venizelos said. “There is no issue with their liquidity, and ratings have no practical significance.”
Despite strong opposition from trade unions and even some of its own lawmakers, Greece’s Socialist government has implemented harsh austerity measures for more than a year, cutting pensions and public sector salaries while increasing taxes and retirement ages.
Other measures include an ambitious €50 billion ($71 billion) privatization program by 2015, and a series of reforms to open up tightly regulated professions such as lawyers, pharmacists and truck drivers.
Taxi drivers, who are also affected by the reforms, have been on strike for the past 11 days, alarming Greece’s tourism industry – a key earner – by periodically blocking airports and harbours.
On Thursday, hundreds of protesting taxi drivers clashed with the police in Greece’s largest port of Piraeus, which adjoins Athens, after preventing thousands of foreign cruise ship passengers from boarding tour coaches to the capital’s ancient sites. No injuries or arrests were reported. Strikers also held a peaceful protest at the northern port of Thessaloniki.
Tourism Minister Pavlos Geroulanos appealed for calm.
“The situation at the harbour this morning is extremely dangerous for tourism,” he said. “Every Greek family lives from tourism, and I believe it is a sector that everybody must protect.”