Athens, creditor group turn up heat on Greek bondholders

Tue Mar 6, 2012 4:02pm EST
 
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By Alex Chambers and Lefteris Papadimas

LONDON/ATHENS (Reuters) - Athens turned up the heat on its creditors on Tuesday as it sought to secure a bond swap that will cut its mountainous debt, while the main bondholders group warned a disorderly default would cause more than a trillion euros of damage to the euro zone.

Greek private creditors have until Thursday night to say whether they will participate in the exchange that is a key part of a bailout program to help Greece manage its wrecked finances and meet a debt repayment on March 20.

A number of the biggest bondholders are signing up but despite the dire warnings, a clutch of Greek pension funds and some foreign investors rejected the offer which will see investors lose almost three-quarters of the value of their holdings and lop about 100 billion euros off Greece's debt.

Athens ratcheted up the pressure, delivering its starkest signal to date that it will force losses on those who do not volunteer.

Its Debt Management Agency (PDMA) said if it got enough support, it intended to make losses "binding on all holders of these bonds" and said the offer was the best deal they would get, echoing comments by Finance Minister Evangelos Venizelos to Reuters on Monday.

Analysts said an Institute of International Finance document, marked "IIF Staff Note: Confidential", seemed designed to alarm investors into participating in the exchange by estimating the extent of havoc a disorderly default would wreak.

"It is difficult to add all these contingent liabilities up with any degree of precision, although it is hard to see how they would not exceed 1 trillion euros," the IIF, which represented private creditors in months of tortuous debt negotiations with Athens, said in the February 18 document obtained by Reuters.

If Greece misses the March 20 payment without a deal in place and succumbs to a hard default, it could be taken as a sign that politicians have lost control of the crisis again, prompting investors to target other weak euro zone countries.   Continued...

 
People leave the Bank of Greece as cleaning works are in progress, in central Athens March 6, 2012. Greece has no plans to extend the March 8 deadline on its bond swap offer to private creditors, Greek officials said on Tuesday, dismissing market rumours that the cutoff date may be put back to increase participation in the offer.   REUTERS/John Kolesidis