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PSI: Just a Breath before the Final Deal?

Blazing negotiations on the PSI are taking place in Athens with some Greek media heralding that agreement on major issues has been already achieved. According to several Greek media, the Greek side has proposed the interest rate to start at 3.5% for bonds maturing in 2014. a5 3.9% for bonds maturing in 2020 and 4.6% for bonds maturing after 2021. Did the private investors accept the Greek proposal?

IIF-chief Charles Dallara told Bloomberg that the two sides “might have something to announce later” on Friday.

It looks as if there is a ‘lunch break’ for the time being, that Finance Minister Venizelos will use to inform EU-officials on the progress of the talks. The negotiations between Dallara and PM Papademos are scheduled to continue at 7.30 pm.

The agreement on the voluntary restructuring of the Greek debt is a precondition set by Greece’s lenders so that the country will be able to secure a second bailout, estimated tobe 130-140 billion euro.

Charles Dallara, head of IIF, represents private Greek bond holders owning a total of 155 billion euro. Greek bond holders had originally asked interest rates of 8 percent.

The target is an overall haircut of 50% of the nominal value of the bonds. However Greece’s private lender’s want securities and limitation of the losses. That’s logical…

In short: low interest rates (3.5%) will apply as long Greece remains in recession, higher interest rates (4.6%)  the moment Greek economy will see development. Given the Greek bonds rates schedule, we can predict, that Greeks will see development in 2021. What will they do until then? Sit down and wait to die, I suppose. With the past, present and future austerity measures, they won’t be able to feed themselves anyway…

PS1 One Greek news portal claimed the two sides agreed on a haircut of 68%….!?

 PS2  Does anyone remember ex PM Papandreou & Co. ‘attacking’ anyone talking about “Greek debt restructuring”?

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