Greece steps up pressure on investors to take bond deal

March 7, 2012 by · Leave a Comment
Filed under: Global News 

Looks like Greece and cocked the hammer.  They are putting the feet of private investors in Greece to the proverbial fire.   Basically they are telling this group of investors to “take the deal” or we will pull the trigger and default.  This would create contagion and they know it.  The investors most likely will take the deal because they already are bailed out in the fact they made loans to a country that could not afford to service them along with having very rich social service programs that would take a very productive economy to support.

There is no easy answer to this problem in Greece and this is not a new problem with them having a large amount of social entitlement programs.   I am hopeful their transition will be successful in the end and hopefully it will give a new perspective on the next generation about what they should expect from their government and what they should expect from themselves and the associated communities.

CBS – Greece stepped up the pressure on its private creditors Tuesday to sign on to a crucial bond swap without which the country will default on its debts this month, but which some investors fear may prove unsuccessful.
Holders of Greek government bonds have until Thursday night to sign up to the deal, which aims to wipe more than billion ($139 billion) off the country’s overall debt by exchanging existing bonds for new ones with a face value reduced by 53.5 percent, longer repayment deadlines and lower interest rates.

The success of the swap — called Private Sector Involvement, or PSI — depends on a high participation rate, of which there is no guarantee.

On Monday, a group representing private holders of Greek government bonds said a dozen banks, insurers and investment funds — including German insurer Allianz, French bank BNP Paribas, Germany’s Commerzbank and Deutsche Bank — will participate in the swap.  But many more will need to sign up by Thursday for Greece to avoid default.

“There remains a long way to go given that these particular banks account for only 20 percent of the available bonds covered in the PSI agreement,” said Michael Hewson, markets analyst at CMC Markets. That would be equivalent to billion ($52.6 billion) out of Greece’s total billion ($271 billion) privately-held debt.

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