It seems to be a dangerous game being played on the head of Greece. The debt-ridden country was sitting at the hairdressers’ chair surrounded by several evil scissors-holders arguing over the haircut-style. The customer had almost fallen asleep as he was deprived of the right to get involved in the argument. The customer had won a free treatment at a beauty salon after successfully participated in the competition “Who is lazy and has the biggest debt”. A sneaky girl specialized in hair washing and extra conditioner application (Merkel), had thoroughly washed the customers’ head and kicked him to sit on the chair in front of the mirror. The customer who happened to be blind had not idea how he looks sitting there with water-dripping hair. When the hairdresser Lagarde grabbed the scissors, a male barber intervened. Dallara argued for hours with Lagarde while Conditioner-girl Merkel jumped in and out and around. At the very end, Dallara left the scene for a hair-show in Paris, Lagarde and Merkel enjoyed a wonderful dinner together in Berlin. The customer was left behind – hair still wet- in a grimy Athens hairdresser’s salon.
Charles Dallara, chief of Institute of International Finance told later Greek private ANTENNA TV that bankers and private creditors made a “maximum” offer to Greece on the haircut deal.
“Our offer, delivered to the (Greek) Prime Minister, is the maximum offer consistent with a voluntary PSI (private-sector involvement) deal,” he said and added “I remain quite hopeful that various efforts will come together.”
Lagarde and Merkel are pushing Dallara & Co to accept a lower interest rate in the new Greek bonds. Delays in the PSI deal delay also the new loan agreement (second bailout) that Greece need to avoid going bankrupt in March. Dallara insists on his veto. And the customer is still on the haircut chair, hoping they won’t forget him amid a harsh struggle to save the money institutions. A customer that definitely needs to have his image changed as of … yesterday.
Alan Rickman’s Famour Haircut Foot Tattoo
IMF, Germany Push for Lower Yield in Greek Bond Swap Deal
The International Monetary Fund and Germany are pushing Greece΄s private creditors to accept lower yields on the new bonds Athens will issue after a planned debt restructuring, people familiar with the talks said, potentially delaying a new emergency loan that Athens needs to avoid bankruptcy.According to Dow Jones Newswires, the people said the IMF argues that a near-final agreement reached between bankers and the Greek government last Friday doesn΄t go far enough to cut the country΄s debt burden and restore Greece΄s debt to a sustainable level.
Athens and the private creditors, represented by the Institute of International Finance, were “one step” away from agreeing to the outlines of a debt deal Friday that would have swapped old Greek bonds for new ones worth half the face value and paying an average 4%-4.2% coupon.
But a lastminute intervention from the IMF and Germany–demanding that the creditors accept a still lower yield–derailed the deal. The IMF, the people said, want the new Greek bonds to pay a maximum 3.5% average coupon.
Euro-zone finance ministers were supposed to give a first thumbs up to a new EUR130 billion bailout for Greece at a Eurogroup meeting in Brussels Monday. But that loan is contingent on a deal to restructure Greek debt–with no decision on a debt deal at hand, decisions on the new loan will get pushed back to next week΄s European summit.
“We are now looking for an agreement with the IIF before the European Union summit Jan. 30. Talks with the IIF are continuing through the phone, but it΄s unlikely something will emerge today,” said a person with direct knowledge of the negotiations Sunday. “Now everyone realizes that time is getting very short.”
Greece has to redeem EUR14.4 billion in maturing bonds March 20. If it doesn΄t get the loan it could become the first euro-zone country to default.
In October, the IIF–at the behest of European governments and the IMF–agreed to negotiate a deal to cut the EUR206 billion worth of debt Greece owes private creditors in half, as part of a new loan deal for the debt-ridden country.
A debt restructuring would wipe away EUR103 billion of Greece΄s debt, saving the country some EUR4 billion in interest payments a year. That means Greece would also have to borrow less from its European partners and the IMF, but the deal would impose steep losses on bondholders.
Estimates say a 4.2% average coupon would result in a real loss of 69% for the creditors–as measured in terms of net present value–over the 30-year duration of the new bonds. With an average coupon of 3.5%, the NPV loss to creditors will rise to around 72%.
The initial size of the debt writeoff was based on a debt sustainability report that the IMF put together in October. But since then, Greece΄s economy has deteriorated, pushing it further into a debt hole that it can΄t climb out of.
The original report estimated that after the debt writeoff–and taking into account a new bailout–Greece΄s debt ratio would fall from around 150% of gross domestic product last year, to 120% of GDP in 2020. But that report also assumed Greece΄s economy would shrink by around 5% last year and 2.8% this year–forecasts that now seem optimistic.
“In the short term, for example, we expected a recession of 2.8% this year and a return to growth in 2013. Now neither look possible. The recession will be deeper and will likely continue next year. There are calls by some among the sovereign creditors [some euro-zone countries] for a new sustainability report before the European Union summit so we know where we stand,” a second person familiar with the talks said.
But the clock is ticking. Greece is aiming to have a final deal with creditors in place by early February so as to complete the formal debt swap program by the end of the month and well before the March 20 redemption deadline.
But the first person said regardless of the latest complications in the talks, the EU and the IMF won΄t let Greece default. He said there are some thoughts of an emergency bridge loan as a last resort for Greece, without elaborating.
“There are no such thoughts [letting Greece default],” he said. “So even if the haircut talks drag on there will be a way for Greece to redeem its bonds in March.”
In the meantime inspectors from the so-called troika of creditors–the IMF, the European Commission and the European Central Bank–are pushing Greece for more budget tightening measures to give their consent to both a debt deal and a new loan.
The demands include slashing salaries in state-owned enterprises and closing down a number of state entities that could result in 10,000 layoffs. The troika is also pushing Greece to take measures that will boost the country΄s competitiveness, including possible cuts in private sector bonus salaries.
The talks with the troika, which began in Athens last week, are expected to conclude by Tuesday. (Capital.gr)
