'Great Stretch' to secure Greek debt return
By Paul Taylor
PARIS (Reuters) - Call it the Great Stretch.
Two years ago, Greece's debt crisis almost brought the euro zone crashing down.
Now European partners are preparing to ease Athens' debt burden without writing off their loans but by stretching them out into the distant future, extending maturities from 30 to 50 years and further cutting some interest rates, EU officials say.
Greece made a successful, if artificially engineered, return to the long-term capital markets last week for the first time since its international bailout in 2010, and just two years after imposing heavy losses on its private creditors.
But with its economy shattered, the country is still a long way from being able to fund itself unassisted in the market. The International Monetary Fund says Greece is likely to need further financial help from the euro zone over the next two years.
One reason why the sale of 3 billion euros in five-year bonds at a yield of 4.95 percent went so smoothly, on the eve of a support visit by German Chancellor Angela Merkel, was that investors are widely anticipating official debt relief.
"That has been quite substantially priced in, and the market is also expecting Greece to be quickly upgraded by the credit rating agencies," said Alessandro Giansanti, senior rate strategist at ING bank in Amsterdam.
"In a second stage, the market is also expecting a reduction in principal on official debt, and no private sector involvement (write-down) in the coming years," he said. Continued...