‘Haircut’ dispute risks delaying Greek rescue

At the July and October 2011 EU Summits, European leaders mapped out an enhanced official support package for Greece and set the parameters for significant private sector involvement (PSI, targeting a face value haircut of 50%). However, the drawn-out debt restructuring discussions have taken a toll on market sentiment and ratcheted up pressure on the banking system (which is heavily exposed to sovereign bonds).

Greece’s new €130bn rescue package could be delayed, after talks on a voluntary haircut for private sector bondholders ended without agreement on the 13 December 2011, according to people involved in the discussions.

Both the debt negotiations and the implementation of structural measures agreed with the European Union and International Monetary Fund are running more than a month behind schedule, despite efforts by Lucas Papademos, the new Greek premier, to accelerate the reform timetable.

ESO: Background information: The Greek debt crisis of 2010 http://www.europeansources.info/record/the-greek-debt-crisis-key-sources/

ESO: Background information: EU reaches agreement on Greek bonds http://www.europeansources.info/record/eu-reaches-agreement-on-greek-bonds/

IMF: Country Report, No.351, 2011: Greece: Fifth Review Under the Stand-By Arrangement, Rephasing and Request for Waivers of Nonobservance of Performance Criteria; http://www.imf.org/external/pubs/ft/scr/2011/cr11351.pdf

IMF: Greece and IMF http://www.imf.org/external/country/GRC/index.htm

Kathimerini, 13.12.11: IMF says no more scope for tax http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_19015_13/12/2011_418462

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