Where is the Greek PSI? tagged: , , , , ,

Where is the Greek PSI?

Posted by keeptalkinggreece in Economy

Some American bloggers ‘celebrated’ on Tuesday having learned that the talks between the Greek government and the private creditors on the exchange of Greek bonds and their ‘haircut’ (PSI) were concluded without results. The interest rate of the coupon, the issue of guarantees, the reluctance of some funds to participate are only some of the dispute issues that hindered a solution the previous day. IIF-chief Charles Dallara left Athens after talks with the Greek Finance Minister Evangelos Venizelos. Is the PSI issue over? Originally it was planned to be finalize by January 2012, but now it looks as if it will be stretched to February. The PSI and the Greek debt restructuring is part of the deal between Greece and the EU for a second bailout worth most likely €130 billion. 

Dow Jones outlines the main points of disagreement:

“Greece has proposed a debt exchange under which investors would swap old government bonds for new ones worth 35% of their old face value, and with a coupon of around 4-5%. It is also throwing in a one-off cash payment equal to about 15% of the old bonds΄ value as an enticement, totaling around EUR30 billion.
The IIF has proposed a swap trading old bonds for new ones with a 50% lower face value, and is demanding a coupon of around 8%, plus guarantees for the principal of the new bonds estimated at around EUR30 billion. Those guarantees could come from a euro-zone body like the European Financial Stability Facility, the group΄s emergency bailout fund.” (via Capital.gr)

Chief of Institute of International Finance, Charles Dallara told Financial Times that there has been some progress but key issues remain unsolved:
 
“Greece’s new €130bn rescue package could be delayed, after talks on a voluntary haircut for private sector bondholders ended without agreement on Tuesday, according to the FT.  “We did make some progress, but the key issues remain open and unresolved,” Charles Dallara, head of a consortium of financial institutions, said in an interview. Among those issues are whether government would be treated the same way as private debt holders and whether the new bond issuance under the haircut would be governed by UK rather than Greek law. Negotiators said talks could restart as early as Thursday in Paris. But timing has become part of the negotiating strategy on both sides, with eurozone negotiators believing that their threat of an involuntary default would appear more real if talks get closer to the larger bond repayment date in March.” (via e-mail submitted to KTG)
 
So before we blow our heads from joy over a total Greek collapse, let’s wait and see….