Greece launches formal offer for debt writedown

DEREK GATOPOULOS NICHOLAS PAPHITIS Associated Press Published:

ATHENS, Greece (AP) -- Greece on Friday issued an official offer for a massive bond swap designed to knock €107 billion ($142 billion) off its debt held by banks and other private investors.

The Finance Ministry issued the formal offer to banks and other investment funds under which creditors are called on to accept a 53.5 percent loss on the face value of the bonds they hold in return for new bonds with longer maturities.

Success of the deal depends on a high level of participation. It is an integral part of the second international bailout for Greece, under which the country will receive €130 billion ($174 billion) in rescue loans in return for further harsh austerity measures.

The debt relief deal will force private bondholders to exchange their devalued Greek government bonds with new ones with a 53.5 percent lower face value, longer maturities of up to 30 years and lower interest rates -- an annual 2 percent by 2015, 3 percent to 2021 and 4.3 percent after that.

Private bondholders will get a €30 billion payment as part of the bond swap deal -- which is to be paid from the €130 billion bailout agreed this week.

The formal announcement followed a Cabinet meeting which discussed implementation of the debt-crippled country's new austerity program.

"We have made a titanic effort -- and I believe titanic is the right word -- to complete prior actions required for approval of financial support for the country and the process of the private sector involvement which will be officially launched today," Prime Minister Lucas Papademos told ministers.

On Thursday, Parliament approved an emergency law on the debt writedown, decided by the 17-member eurozone this week together with a new €130 billion ($173 billion) Greek bailout.

Without either deal, the country would default on its debts next month and would likely be forced to abandon the euro currency.

Greece has been surviving since May 2010 on a first batch of international rescue loans worth a total €110 billion ($146 billion).

Papademos promised to push through emergency legislation needed for the new austerity measures by Feb. 29 -- in time for a European Union leaders' summit the following day.

Meanwhile, Greek unions have joined an Europe-wide protest campaign against economic austerity, also scheduled for Feb. 29, planning a three-hour work stoppage and match to Parliament.

Estonia has become the latest eurozone country to endorse the new rescue deal for Greece, its lawmakers voting 56-32 in favor of the additional funding.

The German Parliament's lower house votes on the package Monday.

German Finance Minister Wolfgang Schaeuble wrote to lawmakers, urging them to support the new Greek rescue package and cautioning: "It also may not be the last time that the German Bundestag has to deal with financial aid for Greece."

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Elena Becatoros and Demetris Nellas in contributed from Athens, and Juergen Baetz from Berlin

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Online:

Greek government statement: https://www.bondcompro.com/greeceexchange/pdfs/Greek.Min-Fin-Press_Release_Feb.24-2012.pdf