The FINANCIAL -- Greece expects to complete its massive debt restructuring by
April, Prime Minister Lucas Papademos said early Tuesday, following
marathon negotiations to complete deal on a second EUR130 billion aid
package.
Papademos said it is vital that both his government, and the one that succeeds it after elections in April, stick to the terms of a deal hammered out over 12 hours of talks with the euro zone, the European Central Bank , the International Monetary Fund and Greece's private creditors.
According to Borsa Italiana - London Stock Exchange Group, it is uncertain how many of the private debt holders will support the deal, which forces them to accept bigger losses on their holdings than those originally agreed last year.
The deal is designed to cut the existing stock of Greek debt by EUR107 billion, but that will depend on a very high level of acceptance from private bondholders.
If the deal is not taken up by enough investors, the Greek government may enact a new law that would retroactively apply "Collective Action Clauses' to the bonds, allowing it to force through the debt restructuring.
That would have the effect of turning what is supposed to be a voluntary debt restructuring into a coercive one, leading ratings agencies to declare the government in default and triggering credit default swap contracts. However, the risk of that default turning disorderly has been reduced by a separate deal between Greece and the European Central Bank , and by the fact that Greek banks that are currently borrowing from the ECB against Greek collateral will receive new, non-defaulted bonds to replace them in the course of the debt swap.
Separately, Papademos said that the revised bailout plan foresees that Greece will return to a primary budget surplus, that is, before debt servicing costs, in 2013. It expects Greece to be able to return to the capital markets in 2015.
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