Sunday, February 19, 2012

Likely Bailout framework emerging if Greek deal is attainable.

4Traders has a report that seems well-informed on the likely trend for tomorrow's Ecofin meeting, the link is here and the following is the main items affecting Greece. Read the entire link to grasp the magnitude of the entire mess!

Under the deal, Greece will have around 100 billion euros of its obligations written off via a debt restructuring involving private-sector holders of Greek government bonds.
The private sector - mostly banks and insurance companies - will swap bonds they hold for longer-dated Greek securities that pay a lower coupon, resulting in a real 70 percent reduction in the value of the assets.
The bond exchange is expected to launch on March 8 and complete three days later, Greece said on Saturday. That means a 14.5-billion-euro bond repayment due on March 20 would be restructured, allowing Greece to avoid default.
The vast majority of the funds in the 130-billion-euro program will be used to finance the bond swap and to ensure that Greece's banking system remains stable: 30 billion euros will go to "sweeteners" to get the private sector to sign up to the swap, and 23 billion will go to recapitalize Greek banks.
A further 35 billion will allow Greece to finance the buying back of the bonds, and 5.7 billion will go to paying off the interest accrued on the bonds being traded in.
The overall objective is to reduce Greece's debts from 160 percent of GDP to around 120 percent by 2020 - the figure and timeframe that the IMF, ECB and the European Commission, together known as the troika, have established as sustainable.



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