After days of talks between Greek officials and the country’s private debt holders the negotiations have hit a saturation point; private bondholders are unwilling to take any more losses on their investments. The current deal is reported to involve a 65-70% real loss on Greek bonds. The debt restructuring deal is designed to reduce Greek debt down from 160% of GDP to 120% of GDP by 2020.
It is now up to the Eurogroup (Eurozone finance ministers) to decide if the deal is plausible and if so to push it forward. Institute of International Finance chief Charles Dallara, who is negotiating on behalf of banks and insurers holding Greek debt, told Antenna TV on Sunday: “We are at a crossroads, either we choose a voluntary debt restructuring; the alternative is to choose the path of default.” If Greece does not receive the second instalment of its aid package the country will not be able to pay back €14.5 billion of bonds that mature in March.
The situation in Greece has deteriorated further since October when the deal was dealt, and subsequently Eurozone governments or investors will have to contribute more than was first thought. It is very important for the deal that the debt restructuring is voluntary, as to avoid Credit Default Swap payments; contagion among the Eurozone debt markets could spread like wildfire if CDS payments are triggered.
In an effort to prove to Eurozone finance ministers and public investors alike, Greece has followed through on its threats to name and shame its most wealthy tax evaders. Yesterday the Greek government released a list of 4,152 major tax dodgers who owe a total of €14.877 billion. The largest single debt was a mammoth €952 million and a 65-year old clothing retailer who owed €600,000 was arrested on the back of the release. This is a step in the right direction for Greece but will it prove to be too little too late in the eyes of the Eurozone finance ministers?
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