Creditors mull Greece deal

GREECE’S fate will be decided by a small group of its private creditors this week as they mull the terms and conditions of a deal that aims to cut €107bn (£89bn) from Athens’ €340bn debt burden.

Greek investors will have to decide in the next couple of days whether to accept a 75 per cent loss on their bonds in return for a mix of new long-term Greek bonds and debt issued by the Eurozone’s bailout fund.

If more than a third of the country’s private debt holders shun the deal, Greece’s second bailout will collapse under terms voted through Athens’ parliament last week.

But even as Greece scrambles to secure support for its second massive rescue from private bondholders, Austria’s premier has said he believes Greece may yet need a third bailout.

Austrian chancellor Werner Faymann said yesterday that the second bailout is not the end of the matter.

“I would not trust anyone who says that [the rescue] for Greece is enough,” Faymann told an Austrian newspaper.

“For Greece it depends on whether they can stick to these measures over several elections.” Athens will hold elections at the end of next month.

In the meantime, Greek leaders must secure the support of at least 66 per cent of its private investors by the end of this week in order to implement the debt swap and meet the conditions of its second bailout.

Failure to do so will mean the country runs out of money in less than two weeks and would trigger a disorderly and potentially disastrous default.

Greece’s preferred outcome is for over three quarters of investors to take part, avoiding the use of retrospective collective action clauses inserted into the terms of Greek bonds last week, which could force reluctant creditors to take part.

Despite a formal endorsement of the swap by the main negotiating body representing investors, the Institute for International Finance (IIF), it is still unclear what proportion of Greece’s private creditors will participate “voluntarily”.

The IIF said yesterday: “The decision to participate in the debt exchange lies exclusively with individual investors. The IIF board is firmly of the view that a successful completion of the exchange will contribute meaningfully to... help Greece.”