PSI-Clock Is Ticking; FinMin: We’re On a Very Delicate Point of Negotiations

The PSI-clock is ticking and according to Greek media there might be official announcement about the progress of the talks even within the day.  Greek Finance Minister Evangelos Venizelos told members of the Parliament, that “the talks are at a very delicate point” and described the discussions about whether the new loan agreement will be according to Greek or British Law as “dangerous”.

“Venizelos: We are in a very delicate point of PSI negotiations

Any discussion whether or not the new loan agreement is governed by Greek or British Law was characterized as “dangerous” by Finance Minister, Evangelos Venizelos, while he made it clear that “the enforcement of the bond exchange is governed by the law of our country, ie in our case, Greece. It is fundamentally different”.

According to protothema.gr, the Minister told Parliament during the debate on the regulation of the multiple law bill that “We are in a very delicate point of consultation and negotiation on the new support program and the PSI”, and added that “Crucial and parallel processes are being made, which require composure, professionalism and national consistency”.  (capital.gr)

IIF-chief Charles Dallara is holding talks with Greek officials in Athens under the pressure of Greece’s lenders who see the agreement of the Greek debt restructuring as a precondition for the second bailout package to the debt-ridden country. Newspaper Proto Thema claims in its online edition and quoting reliable sources that “the  two sides appeared to reach a mutually acceptable agreement.”

 

    

Frustrated Dallara Exits Papademos’ Office Jan18/12

Key and point of conflict for the negotiations agreement is the interest rate (coupon) the the new Greek bonds that will replace those that will undergo a ‘haircut’ of some 50%.  The same ‘reliable sources’ told Proto Thema that Greek officials proposed to private creditors an average interest rate would be around 4.20% – 4.25%,  starting at the first year at levels of  around 3%, This would gradually through the clause linking the amount of rate with the growth of the economy, ie deferred to the future burden of the public to pay higher interest, while providing easier in the first years of the PSI.

But banking circles have reservations about the implementation of the PSI.

 

“The reason is that the total damage for the banks would bring losses of  65% or 70% hindering the voluntary participation of individuals. The same circles believe that it is extremely unlikely to achieve voluntary participation of 70% or 75%, a rate necessary to enable the country benefit from a good haircut debt. 

 

Bankers allegedly get ready to accept the proposed rate of 4% recommended by the Greek government and the new bonds will have a maturity of 30 years. “