Brussels, 07/12/2012 (Agence Europe) - On Friday 7 December, Greece concluded the process of buying back some of its own bonds from private investors, a move required by the troika of lenders (the European Commission, the European Central Bank and the IMF) as part of the second Greek bailout, agreed upon in March 2012. Despite rumours that it would be extended, the buy-back ended as planned at 5.00 pm (GMT) on Friday 7 December.
The aim of the buy-back was to use €10 billion lent by the European Financial Stability Fund (EFSF) to cut the country's debt by no less than €20 billion as part of a strategy unveiled at the end of last month by eurozone finance ministers to get the country's debt back to 124% of GDP in 2020 (see EUROPE 10739). The buy-back is likely to have been a success. Greek newspaper Capital reported on Friday that Greek banks were prepared to accept a write-down of 100% of their remaining Greek bonds. Capital says the country's four biggest banks own €15 billion of the €62 billion still owned by private investors. Their participation depended on hedge fund and other investment sources joining suit (which could make a mint on the bonds they have bought for peanuts in recent months).
The voluntary buy-back was tricky because private investors were expected to agree to a significant write-down after some had already agreed to a total write-down of €107 billion in the spring of this year. The head of the ECB, Mario Draghi, rejected the idea put to him on Thursday 6 December that the burden of the debt was being borne disproportionately by the private sector: “I would say that it is mainly the public sector that is providing new money.”
The Greek government offered as an incentive legal coverage of banks involved in the buy-back to cover them against legal action by investors losing out under the write-down.
Greek finance minister Yannis Stournaras said on Skai TV on Tuesday evening that the IMF had made success in the buy-back a condition for its continuation in the Greek bailout. Following announcement of the results of the buy-back (expected early next week), Eurogroup will examine the Greek situation on Thursday 13 December and decide on the disbursement of €34.4 billion in aid desperately needed by Greece. In order to keep its deadlines, Greece raised more money by issuing one-month and six-month bonds to raise some €3.375 billion at rates likely to increase due to the downgrading to “partial junk bond” status by rating agency Standard and Poor's on Wednesday. On Friday, the Greek statistical office announced that GDP had shrunk by 6.9% in the third quarter of 2012. (EL/transl.fl)