Connect to share and comment

Greece wins support for historic debt swap deal

Athens says it has won enough backing to push through a crucial debt restructuring deal with its private creditors, clearing the way for a second EU/IMF bailout that will prevent the debt-stricken country from imminent default and keep it in the euro zone.

Greece evangelos venizelo 2012 03 09Enlarge
Greek Finance Minister Evangelos Venizelos (L) hailed Friday's agreement as an “exceptional success.” The deal is designed to cut Greece’s national debt by $142 billion, bringing it down from 160 percent of GDP to a little over 120 percent of GDP by 2020. (LOUISA GOULIAMAKI/AFP/Getty Images)

Greece said Friday that it has won enough backing to push through a landmark debt restructuring deal with its private sector lenders, clearing the way for a second EU/IMF bailout that will save the debt-laden country from imminent default and keep it in the euro zone.

Greece’s finance ministry said 85.5 percent of the country’s private creditors and 69.9 percent of its international debt holders agreed to the bond swap, enabling Athens to invoke collection action clauses and force the holdouts to accept the offer, The New York Times reported.

The government needed 75 percent of its private creditors to agree to the deal so that it could push it through. Greek Finance Minister Evangelos Venizelos hailed the agreement as an “exceptional success.”

More from GlobalPost: Greek debt crisis - big hurdle crossed

The biggest restructuring of sovereign debt ever, the deal is designed to cut Greece’s national debt by $142 billion, bring it down from 160 percent of GDP to a little over 120 percent of GDP by 2020.

Banks and other private investors will accept a 53.5 percent haircut on their bonds in exchange for new securities with more favorable repayment terms.

The agreement was needed to secure a second $170 billion bailout from the International Monetary Fund (IMF) and EU, which will enable Greece to avoid a chaotic default on March 20 when maturing loans must be repaid.

The Financial Times quoted an official as saying that procedures would be wrapped up over the weekend, with investors due to receive 24 new bonds for each existing securities on Monday.

European leaders welcomed the deal. A spokesman for German Chancellor Angela Merkel said the take-up for the agreement was “encouraging,” while EU economic affairs commissioner Oli Rehn said he was “very satisfied by the large positive turnout of the voluntary debt exchange in Greece,” according to the BBC.

More from GlobalPost: Greece's six major banks agree to bond-swap deal

All eye are now on the International Swaps and Derivatives Association, which will meet later Friday to decide whether the deal should be deemed a credit event – a technical default – triggering the payment of insurance of up to $3.2 billion.

Greece’s second bailout follows the $143 billion rescue funds loaned to Athens by the EU and IMF in 2010. Unemployment figures released Thursday highlighted the country’s dire predicament, with the number of jobless rising to a record 21 percent in December, Sky News reports.

Youth unemployment has also crept over 50 percent for the first time, with 51.1 percent aged between 15 and 24 currently out of work.

Market reaction to Friday’s events was largely subdued, The Wall Street Journal reported, with European stock markets teetering between small gains and losses as investors remained cautious and reflected on the implications of the deal. 

More from GlobalPost: Chinese cars, made in Bulgaria

http://www.globalpost.com/dispatch/news/regions/europe/120309/greece-wins-support-historic-debt-swap-deal