Greece eyes bailout after debt deal
Greece has cleared a major hurdle in its race to avoid bankruptcy by persuading the vast majority of its private creditors to sign up to the biggest national debt writedown in history, paving the way for a second massive bailout.
Following weeks of intense discussions, the Greek government said today that 83.5% of private investors holding its government bonds were participating in a bond swap. Of the investors holding the 177 billion euro (£148 billion) in bonds governed by Greek law, 85.8% joined.
"We have achieved an exceptional success... and I believe everyone will soon realise that this is the only way to keep the country on its feet and give it a second historic chance that it needs," finance minister Evangelos Venizelos told the Greek parliament.
He said he would recommend the activation of legislation known as "collective action clauses" to force bondholders who refused to sign up into the swap. The issue was to be discussed at a Cabinet meeting later.
"A window of opportunity is opening" with the success of the deal to reduce the country's 368 billion euro (£307 billion) debt by 105 billion euro (£87.7 billion), or about 50 percentage points of gross domestic product, he said.
The bond swap is a radical attempt to pull Greece out of its debt spiral and put its shrinking economy back on the path to recovery. The hope is that by slashing debt, the country can gradually return to growth and eventually repay the remaining money it owes.
The investors will exchange their bonds with new ones worth 53.5% less in face value and easier repayment terms for Greece. A total of 206 billion euro (£172 billion) of Greece's debt is in private hands.
The swap will effectively shift the bulk of the remaining debt into public hands - mainly eurozone countries contributing to Greece's bailouts. If the exchange had failed, Greece would have risked defaulting on its debts in two weeks, when it faced a large bond redemption.
A successful bond swap is also a key condition for Greece to receive a 130 billion euro (£108 billion) package of rescue loans from other eurozone countries and the International Monetary Fund.
Eurozone finance ministers said Greece had fulfilled the conditions to get approval for the bailout soon. "There is no doubt that we will be able to decide on the release of the second Greece package next week," German finance minister Wolfgang Schaeuble said. The ministers also released up to 35.5 billion euro (£ billion) in bailout money to fund the debt swap.