Greece Must Reach Debt Swap Deal By March to Avoid Disorderly Default
Greece’s private creditors warned on Monday that the government must soon reach a deal in negotiations on a plan to slash the country’s debt if it is to avoid a disorderly default when a major bond redemption comes due in late March.
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A team of officials from Greece’s troika of lenders — the European Union, the International Monetary Fund, and the European Central Bank — are in Athens today as part of an effort to put together a 130-billion-euro rescue package the country needs, together with a debt swap deal, to stay afloat.
However, thousands of Greeks have taken to the streets in Athens today to protest the austerity measures required as a term of their next bailout package after already being hit hard by tax hikes and spending cuts that were part of the first bailout agreed in 2010.
Greece has now entered its fifth consecutive year of austerity-fuelled recession as the measures meant to keep the nation afloat cut jobs and wages. Unemployment reached a record high of 17.7 percent in Greece in the third quarter of 2011.
Now Greece is working out a deal with banks to slash its debt of over 350 billion euros by 100 billion euros. Without the so-called “PSI” deal, which would see Greece’s creditors voluntarily giving up a lot of of their promised returns, the EU and IMF have warned that they will not consider Athens’ debt to be back on a sustainable track and will not release further aid.
Negotiations for such a deal broke down on Friday over the interest rate on new bonds Greece will offer and a plan to enforce investor losses. Negotiations will remain suspended until Wednesday.
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