BRUSSELS (MNI) – EU officials are considering ‘technical changes’
to the Greek debt restructuring deal struck in July that would saddle
private investors with bigger losses because market developments since
then have made one of the deal’s elements more costly for Eurozone
governments, a senior European Commission official explained on
Wednesday evening.
“What we are observing is that since last July there have been some
market developments which make the deal somewhat more onerous in terms
of the provision of collateral on the part of creditors, especially for
one of the options that are in the deal,” said Buti.
“This could have an effect on the possible preference for the first
of the four options on the table,” he said, referring to the plan for a
par bond exchange of Greek bonds into a 30-year instrument.
“If there is a disproportionate take up of the first option, with
the current lower rate, it would become more costly,” said Buti.
Under the terms of the debt restructuring deal negotiated in July
by the Institute of International Finance, a banking group, and EU
leaders, Eurozone governments agreed with private investors on a 21%
haircut for private holders of Greek bonds.
“There are these two technical elements,” he said, adding that they
“would not change the spirit of the July agreement.”
If the purpose of the changes is to reduce the cost to the public
sector then the result would logically mean a greater hit for private
investors. That is particularly true given that a larger-than-expected
recession in Greece, along with Athens’ inability to implement a
privatization plan and to crack down on tax evasion, means there is now
a larger financial hole to fill.
The other three options outlined in the private sector debt
exchange plan are a par bond offer that would roll over Greek government
bonds into 30-year instruments, a discount bond exchange into a 30-year
instrument, and a discount bond exchange into a 15 year instrument.
Luxembourg’s Prime Minister, Jean-Claude Juncker, who chairs the
group of euro area finance ministers, said after a meeting of Eurozone
finance ministers on Monday that “technical adjustments” should be
considered to the deal, a position with which the Belgians and Germans
are sympathetic.
The issue however is highly sensitive and the 17 finance ministers
of the euro area are deeply divided.
–Brussels bureau, +324-952-28374; pkoh@marketnews.com
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