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tagged: Charles Dallara, default, Greece, Greeks, IIF, IMF, Moody's, Pimco, PSI, talks to resume jan 18/2012PSI: Greeks Head to IMF as IIF Complains and Hedge Funds Warn of Default
Posted by keeptalkinggreece in Economy
Petros Chistodoulou and Giorgos Zanias, heads of Greece’s Public Debt Management Agency (PDMA) and the Council of Economic Advisers respectively, are heading to Washington for talks with representatives on the International Monetary Fund on the restructuring programme fo the Greek debt. Negotiations between the Greek government and private creditors on the PSI were suspended last Friday as the two sides could not agree on annual interest rates and length of the Greek bonds.
However, Finance Minister Evangelos Venizelos informed members of socialist party PASOK that talks will resume on Wednesday (Jan 18/2012) saying that “our counterparts from the Institute for International Finance will return on Wednesday and our goal is to have a general outline agreed before the next euro-group meeting on Jan. 23.” Venizelos wants to see the outlines of the deal for the sceond bailout package before the European summit on January 30.
The IIF, a Washington-based lobby group representing the world΄s largest banks, agreed in October that it would negotiate a “voluntary” debt write-down deal with Greece aimed at a 50% cut in the face value of bonds held by the private sector.
“The IIF is seeking an annual coupon of 4% to 5%, arguing that is the absolute lower limit of any deal that could be described as voluntary, according to people with direct knowledge of the talks. Some euro-zone governments, led by Germany and supported by the International Monetary Fund, have been pushing for an interest rate of well below 4%, these people said.
The debt write-down is part and parcel of a fresh €130 billion ($164.8 billion) bailout Europe and the IMF have promised Greece to cover its financing needs through 2015. But the amount of public-sector support for Greece will depend on how much the private sector writes off of Greece΄s €360 billion debt.
The goal is to slice €100 billion off that total—which would save Greece some €4 billion in annual interest payments—but presumes 100% voluntary participation in the debt restructuring, something that looks increasingly unlikely and may bring about an involuntary write-down. (capital.gr)
Meanwhile, IIF-Chief Charles Dallara criticized the European negotiators claiming that they do not stick to the agreement of October Summit. Speaking to Financial Times, Dallara said that ”Greek officials negotiate in good faith, but not they other negotiators in the euro zone”. Dallara most probably was referring to Merkel and Sarkozy… FT claims that the private creditors take into consideration to appeal of the German and French leaders in order to make an agreement about the percentage of the ‘haircut’ possible.
German Foreign Minister, Guido Westerwelle, expressed optimism about the PSI talks. “The PSI talks are facing a difficult moment. But with good will, we will reach a positive conclusion” Westerwelle said while on a 2-day visit in Athens.
At the same time, ratings agencies and hedge funds have taken out of their drawers the files titled “Greek Default“. Moody’s warned that “large than 50% haircut would be credit negative for banks”. And Pimco predicted ” Greece is heading for Default”. Read more here.
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I fail to understand why a Greek default followed by an orderly debt rescheduling would be such a terrible thing for Greece or for the world. As the Chief Economist of Citibank recently said: “Europeans didn’t know that outside of Europe reschedulings have come a dime per dozen in recent decades”. The price which a borrower has to pay for a default is that his creditworthiness is wrecked and that he won’t be able to return to capital markets in the foreseeable future. Greece has already paid that price.
Greece would have to make sure that she does not become perceived has having provoked the default and that she becomes perceived as negotiating an orderly debt rescheduling in good faith. This should allow the EU to provide bridge-financing for the budget and current account deficits. Details below.
http://klauskastner.blogspot.com/2012/01/why-so-much-fear-of-default.html
Because in countries with their own currency a debt restructuring is followed by a currency devaluation. This is not possible in Greece due to the common EU currency. Therefore the issue is a difficult task.
I beg your pardon: does California have a different currency than the rest of the USA? How about NYC a couple of decades ago?
Greece does not need to exit the Euro and Greece would be foolish at this point to do so. Perhaps in a few years’ time when things have settled down a bit but not now.
Greece needs: (a) assured financing for the ongoing operations (budget and current account deficits); (b) a real boost to the economy not funded by the government but by third parties instead (private foreign investors, EIB, Structural Funds, etc.); and (c) continued implementation of reforms.
The existing debt falls into the category of “you cannot draw water from a dried-out well”. You might as well recognize that instead of continuing to dump water into the well so that you can draw some water out of it. Thus, an orderly restructuring with existing creditors is the only sensible way.
http://klauskastner.blogspot.com/2011/12/since-all-current-rescue-efforts-are.html
Klaus, you make some good comments. Do you have any money to loan us? Are you with the Troika?
I am not with the Troika and neither am I German…
What Greece needs more than money is leadership to marshal the resources of the Greek people towards one common goal — to become a well-run modern country and perhaps even the economic tiger of the Eastern Mediterranean. Have I just been drinking Ouzo? No, I mean this! Otto Rehagel didn’t show the Greeks how to play soccer; they knew that before him. But he showed them how to marshal their resources towards one common objective.
That leadership is obviously not coming from politicians but it could easily come from elsewhere. There is the Greek academia, the brainpower, the media, the business people, the artists, etc. etc. All people with very impressive capabilities. If only they would organize their mental resources and focus on the right subjects, they could effectively bypass the politicans and start popular movements.
But what do I see? I see Greek brainpower spending all their resources on issues which are beyond their control and which they cannot really influence (like the European debt problem; the PSI; etc.). And after 2 years of crisis, I have not seen one proposal by Greek brainpower that could be considered as a long-term economic development plan to get the Greek economy into shape.
http://klauskastner.blogspot.com/2011/11/appeal-to-greek-brainpower.html
http://klauskastner.blogspot.com/2011/11/greeks-dont-leave-planning-of-your.html
I doubt that the dinasauruses’ system here would allow any brainpower to effectively raise voice or it would accept any brainpower speaking. There has been an active front of acdemicians, mostly lawyers, economicsts like Varoufakis, etc and what happened? They have been brandmarked as people wanting the total collapse of the country, as heretics to mainstream which is ‘give it all to Greece’s lenders’.
And between us, with such a MoU there is not much space for any long-term economic development plan for Greece. And for any country getting IMF aid.
Everything has already been choreographed long ago for Greece’s future. All the decisions have been made probably and now it’s just focus group testing by the Media with each new component, i.e., news byte. Hello Drachmoula, patriotisa, pou eisoun tosa kero??
new song? lol
Drachmae love me tender love me sweet, you will never know.
How much have I loved you too, now you say you do, come back to me oh Drachmoula, please come back to me….
na? inspiriing, isn’t it?