Lenders make better offer for Greek ‘haircut’
A new negotiations round was concluded on 13 December in Athens between the Greek government and the representatives of its private creditors, aka banks, over the application of the Private Sector Involvement (PSI) in cutting down the country’s debt, namely a debt ‘haircut’.
Under the general terms of the European Council’s 26 October Agreement, the PSI will contain a 50% reduction of the debt to be included in the agreement and the lenders receive 35% of the value of new bonds guaranteed by the European Financial Stability Facility, presently carrying a triple-A rating, plus 15% in cash, and the interest rate on the new bonds cannot be higher than the average interest rate of Greek bonds at present.
It must be remembered that the exchange is optional for lenders - negotiations cover the terms and the procedure of the swaps and the interest rate of the new bonds. According to the representatives of the two sides, the latest offer by the banks is closer to what the Greek government had originally proposed. The Greek treasury has offered a 4.5% interest rate on the new bonds to banks, while the banks themselves had been asking for around 7.5-8%
