Hedge funds have been known to use hardball tactics to make money. Now they have come up with a new one: suing Greece in a human rights court to make good on its bond payments.
The tactic has emerged in conversations with lawyers and hedge funds as it became clear that Greece was considering passing legislation to force all private bondholders to take losses, while exempting the European Central Bank, which is the largest institutional holder of Greek bonds with 50 billion euros or so.
Legal experts suggest that the investors may have a case because if Greece changes the terms of its bonds so that investors receive less than they are owed, that could be viewed as a property rights violation — and in Europe, property rights are human rights.
The bond restructuring is a critical element for Greece to receive its latest bailout from the international community. As part of that 130 billion euro ($165.5 billion) rescue, Greece is looking to cut its debt by 100 billion euros through 2014 by forcing its bankers to accept a 50 percent loss on new bonds that they receive in a debt exchange.
According to one senior government official involved in the negotiations, Greece will present an offer to creditors this week that includes an interest rate or coupon on new bonds received in exchange for the old bonds that is less than the 4 percent private creditors have been pushing for — and they will be forced to accept it whether they like it or not.
“This is crunch time for us. The time for niceties has expired,” said the person, who was not authorized to talk publicly. “These guys will have to accept everything.”
….“The private sector has come a long way. We hope that the other parties agree that it is more constructive to reach a voluntary agreement than the alternative.”
At the root of the dispute is a growing insistence on the part of Germany and the International Monetary Fund that as Greece’s economy continues to collapse, its debt — now about 140 percent of its gross domestic product — needs to be reduced as rapidly as possible.
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PS I wonder when Greek citizens will open a case at the European Court of Human Rights for being forced to unemployment and to pay the last cent out of their pockets, being deprived of dignity, being unable to cover basic needs, Not to forget to mention a clause for the immense psychological distress of the last two years…
Knowing that Greece was the first country ever to be convicted twice for the same offence in the European Court of Justice in Strasbourg, I don’t see how these hedge funds would manage to get Greece to obey a conviction on this subject from the Human Rights Court. IF they would get a conviction, that is.
On Al Jazeera yesterday it was argued that a couple of these hedge funds started buying Greek debt after the October 26 decisions with the sole aim of blocking any PSI-agreement if it would ever be agreed upon. Because they are no part of the talks and the eventual deals. And this, because they are not sure anymore of their win-win position concerning Greek debt, since it does not look likely anymore that a Credit Event will be declared. Very interesting…
very interesting indeed and thanks for the info, Antonis
I just remember the name of the guy: Yanis Varoufakis. (Big, bald, looks like a boxer) 😆