Greece expects bondholders to accept a one-time offer to write off about 100 billion euros ($140 billion) of Greek debt and is ready to force them to participate if necessary, Finance Minister Evangelos Venizelos said.
“This is the best offer,” Venizelos said in a Bloomberg Television interview with Nicole Itano in Athens today. “This is the best offer because this is the only one, the only existing offer.”
European leaders are facing the first test of their attempt to turn the page on the two-year debt crisis as Greece’s private creditors decide whether to sign off on the biggest sovereign-debt restructuring in history. The success of the 106 billion-euro swap, confirmed on the eve of last week’s European summit, depends on how many investors agree to the writedown by the March 8 deadline.
“This is the critical week,” Venizelos said.
Twelve banks and investors represented on the steering committee of the Institute of International Finance, the body that negotiated the swap with the government, said today that they planned to take up the offer. They include companies with the largest holdings of Greek government bonds such as National Bank of Greece SA, BNP Paribas, Commerzbank AG and Deutsche Bank AG, an e-mailed statement from the Washington-based IIF said.
Only one steering-committee member, Landesbank Baden-Wuerttemberg, has still to back the offer, said the IIF, which represents more than 450 financial-services companies globally. Germany’s DSW investor protection group meanwhile advised private-sector bondholders to reject the offer.
The Greek government has set a 75 percent participation rate as a threshold for proceeding with the transaction, in which investors will forgive 53.5 percent of their principal and exchange their remaining holdings for new Greek government bonds and notes from the European Financial Stability Facility. Euro-area finance ministers last week authorized the EFSF to issue bonds for the swap.
Erik Nielsen, chief global economist at UniCredit SpA in London, said enough creditors will probably participate in the writedown to avoid triggering so-called collective action clauses, which could be used by Greece to compel investors to participate and roil markets by triggering credit-default swap insurance contracts. Euro-area finance ministers will hold a teleconference on March 9 to review the deal’s outcome.
“If we can avoid the triggering of CDSs, this is the best solution,” said Venizelos. “With a near universal participation it’s not necessary to activate CACs. But this clause exists in our legal order and we are ready to implement the legislation if necessary.”
European Union leaders last week said their focus will shift from budget-cutting to growth measures after completing the details of the second Greek bailout. Whether that 130 billion-euro rescue package can proceed will depend on the outcome of this week’s swap. The writedown will help Greece focus on restoring growth to an economy now in its fifth year of recession, the longest stretch in peacetime, Venizelos said.
“Greece is now, after the approval of the new program and after the implementation and completion of the PSI, ready to come back to growth,” he said. “It is absolutely necessary.”
The plan for Greece seeks to reduce debt to 120.5 percent of gross domestic product by 2020. With the swap, that is “an achievable target,” Venizelos said.
Approval of the swap and Greece’s second rescue by other euro-area countries shows that they don’t want to push Greece out of the currency zone, Venizelos said.
“I accept that this phenomenon of the so-called Greek fatigue is a parameter,” Venizelos said. In the end, though, Greece’s partners see the country as “an integral part” of the European community, he said. “Without Greece, it is not possible to preserve the integrity of the European phenomenon.”
Venizelos on Feb. 15 accused some of his euro-area finance minister counterparts of “playing with fire” in trying to push Greece out of the euro area. Those comments were made before approval of the package, which is “the critical point,” Venizelos said today.
Responding to a question about comments made by Luxembourg Prime Minister Jean-Claude Juncker on March 1, when he said the bloc has a backup “Plan B” for Greece, Venizelos said there is no alternative course of action if the debt swap fails.
“We only have a Plan A,” Venizelos said. “The acceptance and full implementation of the existing plan, the so-called Plan A, is the best solution for Greece, for the euro zone and also for creditors and holders.”
Venizelos, who is touted as a possible next leader of the socialist Pasok party, declined to comment on whether he will stand at party elections due on March 18 to replace George Papandreou, the former prime minister and outgoing leader.
Any new government arising from the next parliamentary elections, probably to be held around April 29 or May 6, will respect the commitments given to the EU and International Monetary Fund in return for funds, he said. Opinion polls suggest neither Pasok nor New Democracy, the second-biggest parliamentary presence, will be able to govern alone.
“The appointment of a strong and stable government is something absolutely sure,” Venizelos said. “We are ready to take our responsibilities and fulfill our commitments and our obligations before our partners.”