IIF’s Dallara due in Athens as PSI talks start to bear fruit
  The head of the Institute of International Finance, Charles Dallara. |
“A part of the talks relates to the coupon, the jurisdiction under which the bonds will be issued and a whole series of other parameters,” Sachinidis told Real FM radio on Tuesday. While no final agreement has been reached yet, “there are developments,” and the negotiations “are at a satisfactory point,” he said.
Olli Rehn, the European Union’s economic and monetary affairs commissioner, said on Tuesday that the negotiators were “about to finalize shortly.”
Activity is generally stepping up though as a deal looks closer than ever. Late on Tuesday, International Monetary Fund Managing Director Christine Lagarde met German Chancellor Angela Merkel in Berlin to discuss the progress in the Greek PSI plan, before heading to Paris for talks with French President Nicolas Sarkozy.
“The voluntary restructuring of Greece’s debt must be moved forward,” Merkel had told reporters in Berlin on Monday after talks with Sarkozy.
“In our view, the second Greek program, including the debt restructuring, has to be carried out quickly now because otherwise it won’t be possible to pay out the next tranche for Greece.”
On Wednesday the head of the Institute of International Finance (IIF), Charles Dallara, is due to arrive in Athens, where he will meet with Prime Minister Lucas Papademos and Finance Minister Evangelos Venizelos.
“It is important to build on the progress so far to move the negotiations for a voluntary agreement forward as rapidly as possible,” the IIF said on Tuesday in a statement. or is the true closer to this ? Which is the reality ? http://www.fxstreet.com/fundamental/market-view/european-crisis/2012/01/10/02/ Greece debt holders face forceful restructuringThe rescue plan for Greece has just made a turn for the worse, suggesting the inevitable outright default of Greece may lurk nearer than the market expected. . Late in the American session investors were reminded once again of the penurious financial state of Greece as headlines from DJN came across suggesting Greece and the EU may drop voluntary restructuring procedure to instead impose it forcefully. While some senior Euro Zone Govt official sources continue to downplay this grim scenario by reassuring that Greek debt haircut will be just 50%, others have come to the forefront of today's reality by finally starting to acknowledge restructuring will be forced on investors if needed. The sources claim Greece will probably need more money than thought in October . A new Greek debt is expected to be announced by EU leaders announced "early next week", As commented in previous reports, the erroneous art of kicking the can down the road may delay once's problem but does not prevent an inevitable outcome from eventually materializing. As Jamie Coleman from Forexlive puts it: “They told us Greece would never restructure… Then they told us they would never restructure unless it was voluntary. Now they are telling us they may shove a restructuring down the market’s throat. So if you are a bondholder in another country on the periphery of the euro zone, are you going to believe the EU’s protestations that Greece was a “one-off” and that there will not be any further restructurings?" EU officials need to reach an agreement on the maturity of the debt as well as the interest rate in order to finalize the rescue plan for Greece. Without it the country will most likely default. Meanwhile, today German Chancellor Angela Merkel and Christina Lagarde of the IMF engaged in a long-lasting meeting on how to proceed through this arduous pathway of tackling the debt crisis including the hot subject of a new Greek rescue deal and promote growth, jobs. According to Michael Conlon, FX Mentor at ForexNews.com: "So far leaders are winning the PR battle and have kept the bond vigilantes away for now, though there is a lot of bond issuances due out over the course of the next month so they are not out of the woods just yet.” Greece meanwhile held a debt auction today, which resulted in better than expected sale of 1.625 billion euros against a 1.25 billion euro target. The 6 month treasury bills have been sold at an average yield of 4.9%, lower than previous 4.95%. |
Doubts Grow over Greek Debt Restructuring
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The outlook for cash-strapped Greece is looking increasingly bleak. Government reforms are behind target, and negotiations with private creditors over voluntary debt relief are stalled. A disorderly default could be just weeks away.
Stalled Negotiations
But the negotiations between Greece and the financial companies represented by the Institute of International Finance (IIF) are hanging in the balance. Although IIF Managing Director Charles Dallara recently said that progress was being made, he also made it clear that the lenders are not willing to take more than the agreed 50 percent haircut.
Other players are even more pessimistic. "There is not even a common negotiating position on the part of the lenders," says the representative of one participating German bank.
Besides, the investors also have highly diverging interests. For instance, hedge funds have bought up large numbers of bonds, some of which already mature in March. They have no interest in a debt restructuring. Insiders estimate that speculative investors could be holding up to €50 billion in Greek debt. And bankers, like Commerzbank CEO Martin Blessing, feel that a debt restructuring limited to private creditors is fundamentally wrong.
"The IMF is calling for up to 90 percent in debt relief," complains one banker -- a claim that sources in the IMF deny. But if the haircut is so large, there is a risk that, even if the lead negotiators are in agreement, not enough creditors will play along so that the targeted debt ratio of 120 percent can be reached.