Greece expects bondholders to accept a one-time offer to writeoff about 100 billion euros ($140 billion) of Greek debt and isready to force them to participate if necessary, Finance MinisterEvangelos Venizelos said.

“This is the best offer,” Venizelos said in a BloombergTelevision interview with Nicole Itano in Athens today. “This isthe best offer because this is the only one, the only existingoffer.”

European leaders are facing the first test of their attempt toturn the page on the two-year debt crisis as Greece's privatecreditors decide whether to sign off on the biggest sovereign-debtrestructuring in history. The success of the 106 billion-euro swap,confirmed on the eve of last week's European summit, depends on howmany 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 committeeof the Institute of International Finance, the body that negotiatedthe swap with the government, said today that they planned to takeup the offer. They include companies with the largest holdings ofGreek government bonds such as National Bank of Greece SA, BNPParibas, Commerzbank AG and Deutsche Bank AG, an e-mailed statementfrom the Washington-based IIF said.

Only one steering-committee member, LandesbankBaden-Wuerttemberg, has still to back the offer, said the IIF,which represents more than 450 financial-services companiesglobally. Germany's DSW investor protection group meanwhile advisedprivate-sector bondholders to reject the offer.

The Greek government has set a 75 percent participation rate asa threshold for proceeding with the transaction, in which investorswill forgive 53.5 percent of their principal and exchange theirremaining holdings for new Greek government bonds and notes fromthe European Financial Stability Facility. Euro-area financeministers last week authorized the EFSF to issue bonds for theswap.

Erik Nielsen, chief global economist at UniCredit SpA in London,said enough creditors will probably participate in the writedown toavoid triggering so-called collective action clauses, which couldbe used by Greece to compel investors to participate and roilmarkets by triggering credit-default swap insurance contracts.Euro-area finance ministers will hold a teleconference on March 9to review the deal's outcome.

'Ready to Implement'

“If we can avoid the triggering of CDSs, this is the bestsolution,” said Venizelos. “With a near universal participationit's not necessary to activate CACs. But this clause exists in ourlegal order and we are ready to implement the legislation ifnecessary.”

European Union leaders last week said their focus will shiftfrom budget-cutting to growth measures after completing the detailsof the second Greek bailout. Whether that 130 billion-euro rescuepackage can proceed will depend on the outcome of this week's swap.The writedown will help Greece focus on restoring growth to aneconomy now in its fifth year of recession, the longest stretch inpeacetime, Venizelos said.

“Greece is now, after the approval of the new program and afterthe implementation and completion of the PSI, ready to come back togrowth,” he said. “It is absolutely necessary.”

The plan for Greece seeks to reduce debt to 120.5 percent ofgross domestic product by 2020. With the swap, that is “anachievable target,” Venizelos said.

Approval of the swap and Greece's second rescue by othereuro-area countries shows that they don't want to push Greece outof the currency zone, Venizelos said.

“I accept that this phenomenon of the so-called Greek fatigue isa parameter,” Venizelos said. In the end, though, Greece's partnerssee the country as “an integral part” of the European community, hesaid. “Without Greece, it is not possible to preserve the integrityof the European phenomenon.”

Venizelos on Feb. 15 accused some of his euro-area financeminister counterparts of “playing with fire” in trying to pushGreece out of the euro area. Those comments were made beforeapproval of the package, which is “the critical point,” Venizelossaid today.

Responding to a question about comments made by Luxembourg PrimeMinister Jean-Claude Juncker on March 1, when he said the bloc hasa backup “Plan B” for Greece, Venizelos said there is noalternative course of action if the debt swap fails.

“We only have a Plan A,” Venizelos said. “The acceptance andfull implementation of the existing plan, the so-called Plan A, isthe best solution for Greece, for the euro zone and also forcreditors and holders.”

Venizelos, who is touted as a possible next leader of thesocialist Pasok party, declined to comment on whether he will standat party elections due on March 18 to replace George Papandreou,the former prime minister and outgoing leader.

Any new government arising from the next parliamentaryelections, probably to be held around April 29 or May 6, willrespect the commitments given to the EU and International MonetaryFund in return for funds, he said. Opinion polls suggest neitherPasok nor New Democracy, the second-biggest parliamentary presence,will be able to govern alone.

“The appointment of a strong and stable government is somethingabsolutely sure,” Venizelos said. “We are ready to take ourresponsibilities and fulfill our commitments and our obligationsbefore our partners.”

Bloomberg News

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