Greece and its private creditors are apparently one step away from completing the voluntary Greek Bond Swap (PSI). “We are one step away from PSI deal”, Greek Finance Minister Evangelos Venizelos said. “We are close to the finalization of a voluntary PSI”, head of Institute of International Finance Charles Dallara said also ( see IIF press release below). So why is everybody unhappy?
Because the devil is hidden in the detail… Not in the PSI detail, but in the parameters surrounding the PSI. For Greece’s lenders, i.e. the Troika of IMF, EU and ECB, the PSI is just one of the preconditions for the second rescue package for the debt-ridden country. The other precondition is that the Greek government should commit itself to the implementation of a very strict fiscal discipline programme. A programme that will destroy the social web with rash mass lay-offs in teh public sector, dumping prices for the the workers in the private sector and sharp cuts in the welfare state. This programme does not contain any plans to boost the economic development; on the contrary it pushes the country deeper in recession.
Prime Minister Lucas Papademos is meeting the political leaders of the three parties forming the coalition government on Sunday, just hours before he takes off with the airplane to Brussels to attend the EU Summit. Under immense time pressure Papademos seeks the consent of Papandreou (PASOK), Samaras (Nea Dimokratia) and Karatzaferis (LAOS) to the additional Troika-tailored austerity measures. Or at least a consent to a paper with ‘red lines’ that the Greek government can put on the negotiation table with the country’s lenders.
German Chancellor Angela Merkel told German newspaper BILD, that Greece will remain in the euro zone. Taking into consideration the Merkel’s panic about a EZ collapse, Athens should play its strong card and finally negotiate with the Troika. Not just accept Troika’s dictate without AHs! and OHs!
IIF’s statement on PSI/ Jan 28, 2012
Statement on Behalf of the Co-Chairmen
Athens, Greece, January 28, 2012 — Mr. Charles Dallara and Mr. Jean Lemierre, Steering Committee Co-Chairmen of the Private Creditor-Investor Committee for Greece, stated: “We continued discussions today with Greek Prime Minister Lucas Papademos and Deputy Prime Minister and Finance Minister Evangelos Venizelos over the elements of a voluntary debt exchange. Further progress was made, building on the understandings reached yesterday on the key legal and technical issues. We are close to the finalization of a voluntary PSI within the framework expressed publicly earlier this week by Luxembourg Prime Minister Jean-Claude Juncker in his capacity as Chairman of the Eurogroup. We expect to conclude next week as discussions on other issues move forward.”
Note to reporters: Mr. Dallara and Mr.Lemierre will be leaving Athens tomorrow and will remain in close consultation with Greek and other authorities. (IIF)