http://www.athensnews.gr/portal/11/52538
| Creditors’ tug-of-war stalls PSI deal | |||||
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 The abrupt departure from Athens of Charles Dallara, the private creditors’ chief negotiator, on Saturday, stalled talks for second time in eight days to come up with private-sector involvement (PSI) deal that is precondition to getting a second bailout for Greece and averting bankruptcy. Government officials had been expecting Dallara, who negotiates in the name of creditors organised in the Institute of International Finance, to hold meetings on Saturday but he left early in the day for Paris. The IIF denied that Dallara and his adviser Jean Lemierre had left unexpectedly and said they had longstanding personal appointments. A technical team stayed in the capital to work on details, and negotiations will continue over the phone. The writedown on the national debt now remains deadlocked ahead of Monday’s two-day Eurogroup meeting in Brussels. The eurozone finance ministers were supposed to hear their Finance Minister Evangelos Venizelos outline a private sector involvement (PSI) deal with Dallara’s Institute of International Finance (IIF) to halve the portion of the state’s 370bn euro debt that is in the hands of private bondholders (205bn euros). But the bond swap that was a precondition for the second EU-IMF bailout, worth 130bn euros, has been stranded for months in a tug-of-war between the “official” and the “private” sectors of the country’s creditors over the interest rate of the new bonds. In an ironic twist to the PSI saga, pro-government newspapers, like To Vima and Kathimerini, on Sunday blamed the International Monetary Fund for allegedly "blackmailing" Athens to push for a lower coupon than the 4.2 percent rate which Dallara had agreed with Venizelos in the latest round of PSI negotiations. The IMF has argued since last month that a nominal haircut of 50 percent would not ease the country’s debt burden enough to make it sustainable in the long run, unless the interest rate on the new bonds was capped at 3 percent or less. EU thumbs down But the Washington-based IMF has no direct part to play in the PSI negotiations other than giving expert advice on debt sustainability to the EU leaders who will ultimately decide on the final blueprint of the bailout at their upcoming summit on January 30. The latter’s decision will be based on the merits of a bond swap that must make the country’s debt sustainable but also ensure that private bondholders - especially EU banks and hedge funds – take their fair share of losses. Neither of these conditions appeared to be met on Friday afternoon when the “euro working group” of senior eurozone finance ministry officials held a teleconference with Venizelos and Dallara to assess the proposed PSI deal. According to Athens News sources close to the negotiations, the Greek PSI proposals were given a thumbs-down at the teleconference by the four eurozone countries with a triple-A credit rating (Germany, Finland, Holland, Luxemburg), who insisted that no interest rate above 3.5 percent was acceptable. Bet on wrong horse Much to the embarrassment of Venizelos, it later transpired that Dallara had been mandated by the IIF steering committee of Greek bondholders to bargain for average coupon rates no lower than 3.8 percent. Investors who have bought Greek bonds in recent months at 20-30 cents to the euro can still make a hefty profit from a bond swap at that rate. However, not only did Venizelos concede an average coupon of 4.25 percent but he also agreed to additional “credit sweeteners” in the form of 30bn euros in triple-A bonds issued by the eurozone’s bailout fund, the EFSF, instead of cash. Lucas Papademos’ government thus found itself scrambling to tail-end financial profiteers for any PSI deal whatsoever - regardless of cost to future Greek generations - just to clinch the next bailout installment on time to avoid bankruptcy when a 14.4bn euro bond matures on March 20. | |||||
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