|Antonis Samaras, Greek prime minister, and Angela Merkel, German chancellor, meeting in Athens, Oct 09, 2012. |
The Greek government is set to get its €34.4bn
delayed bailout payment soon after its bond buyback program geared towards
cutting €21.1bn from the country's sovereign debt, just fell short of target.
Greece on Tuesday night had received offers from
private investors to sell €32bn in bonds back for an average of 33.5 cents in
the euro - - effectively agreeing to a 66.5% haircut on their holdings.
Greece borrowed €10bn to execute the buyback,
with the aim of reducing its public debt by €21.1bn. The average offer to buy
back the bonds was 33.8% of the principal amount. So Greece needs to spend
€11.2bn in total.
Greece’s lenders had estimated that the country’s
debt would be cut by 11% but it will now be less than 10% and last night
Eurozone finance ministers discussed the issue in a teleconference on how to
reduce the ratio to GDP from 126.6% to 124%, which the International Monetary
Fund had set as a benchmark in order to continue participating in the Greek
program. Without the relief, Greece’s debt would have stood at 144% of GDP by
the end of the decade, which the IMF considers unsustainable.
The issue is due to discussed at Thursday’s
Eurogroup meeting in Brussels.
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