For Greece to receive its second international bailout, private lenders need to agree to a substantial debt write-off. The deadline for an agreement is tonight.
It’s crunch time again in Athens: Private creditors have until 10:00 p.m. local time to decide if they are going to take part in a debt swap deal that is part of a financial rescue package for Greece. Without the debt swap, a critical second international bailout will not be launched, and without fresh money, the country will descend into an uncontrolled default with unpredictable consequences not just for Greece but also the global economy.
“It is going well, we are optimistic,” a government official told Reuters this morning. “The pace of responses to the bond offer is good, the percentage of bondholders tendering voluntarily is very high," said the official, who spoke on condition of anonymity.
The Greek state owes about €350 billion ($461.6 billion), or 160 percent of GDP, to international and domestic lenders. Private investors currently hold about €206 billion ($272 billion) of Greek bonds, €107 billion ($141 billion) of which the debt swap is meant to shave off.
According to the deal the Greek government negotiated with the Institute of International Finance (IIF), which represents most of Greece's private sector creditors, investors will write off 53.5 percent of debt – which amounts to a waiver of 74 percent when the loss in future interest is taken into account – and exchange the rest of bonds they are holding into new papers which are worth less, have a longer maturity, and pay less interest.