The eurozone-IMF rescue for Greece: the main points
Greece euro
(ATHENS) - The Greek bond swap is intended to avert default by Greece when debt falls due on March 20 and is a key part of a eurozone-IMF rescue worth up to 237 billion euros to enable the country to rebuild its economy.
Some 83.5 percent of the country's private creditors tendered bonds for exchange, the Greek finance ministry announced on Friday, solidly above a 75-percent requirement Greece had set for the deal to move forward.
Here are the main points of the overall rescue package as published by the Eurogroup of eurozone finance ministers, with extra detail from the Greek finance ministry on Private Sector Involvement (PSI) in the debt writedown:
- Under the PSI debt write-off by banks, insurance companies and investment funds, these investors will lose 53.5 percent of the face value on the 206 billion euros ($273 billion) of privately-held Greek debt. This will reduce the debt owed by Greece to private creditors by 107 billion euros. Greece has a total public debt of about 350 billion euros.
- The PSI, a record in the history of such debt write-offs, is conditional on participation. The Greek government has said it will not go through with the deal unless participation reaches at least 75 percent. A government source said Thursday that the 75 percent level had been surpassed.
The EU and International Monetary Fund would like to see 95 percent participation. The overall objective is to reduce Greece debt to a sustainable level of 120.5 percent of gross domestic product (GDP) in 2020.
The Greek government was set to make an official announcement on the participation rate at 0600 GMT on Friday.
- The PSI accord is based on a 30-year debt swap entailing variable rates for creditors.
Greek debt holders will receive new bonds with a face value equivalent to 31.5 percent of the face amount of the debt exchanged, plus 24-month notes from the European Financial Stability Facility, the eurozone's current rescue fund.
Holders will also receive detachable securities linked to growth of gross domestic product with a notional amount equal to the face amount of the new bonds.
The interest rate offered on the new securities is 2.0 percent to 2015, 3.0 percent to 2020 and 4.3 percent per year thereafter, until final maturity in 2042.
The new maturities will be governed by English law.
The losses on the bonds, in the accounting to emerge from the investing institutions themselves, will probably give a higher loss than 53.5 percent because in addition to the loss in face value, they take into account total loss of earnings and the use of written-off money over the intended lifetime of the loans.
- Greece will receive public loans worth total 130 billion euros up to the end of 2014 of which 30 billion euros is in the form of guarantees to encourage the Greek private banks to participate in the debt write-down by helping cover their losses.
This package of loans is in addition to the first rescue funding of 110 billion euros approved in May 2010. The IMF is due to participate in the latest round of lending but to an extent which has yet to be determined.
- The interest rate charged on loans already made to Greece is to be reduced, representing a saving for Greece of 1.4 billion euros.
- The European Central Bank has separately swapped with Athens the Greek bonds it bought at a steep discount on secondary markets at the height of the debt crisis. The profits booked from this swap at face value are being transferred to eurozone countries to be used for aid to Greece. The amount concerned is believed to total several billion euros.
- In exchange, the Greek parliament has approved further budget action totalling 3.3 billion euros in 2012, largely from a cut in minimum pay levels and a reduction of pensions.