Greece Debt
Kostas Tsironis/Bloomberg
Visitors at the Greek stock exchange in Athens on Nov. 1, 2011.
Visitors at the Greek stock exchange in Athens on Nov. 1, 2011. Photographer: Kostas Tsironis/Bloomberg
Resolving the Greek sovereign-debt
crisis is crucial to avoiding contagion in Europe, said Deutsche
Bank AG (DBK) Chief Executive Officer Josef Ackermann, as private
bondholders met Prime Minister Lucas Papademos to seek an accord
to cut the nation’s borrowings.
“I’m confident that we can get our act together in Greece
and avoid a major contagion, but that is still a very open
question,” Ackermann told Bloomberg News in an interview at the
World Economic Forum in Davos, Switzerland yesterday. “That
will have a very decisive impact on what is happening in the
economy.”
Ackermann chairs the Institute of International Finance,
the Washington-based industry group that’s leading the debt-swap
talks on behalf of private bondholders. “Some progress” was
made at a meeting last night in Athens between Charles Dallara,
the IIF’s managing director, and Papademos after European
finance ministers demanded this week that bondholders take
bigger losses on their Greek holdings. Work is set to continue
today, the IIF said in an e-mailed statement.
Ackermann, 63, said the cost of allowing Greece to fail
would stretch beyond sovereign debt to investments in the
country and the collapse of its economy. “On top of that you
have contagion — Portugal is already under scrutiny, Italy,
Ireland, Spain and so on,” he said in a CNBC interview.
Greece and its creditors are haggling over the terms of an
accord to reduce the country’s borrowings three months after
private bondholders agreed to a 50 percent cut in the face value
of more than 200 billion euros ($262 billion) of debt by
voluntarily swapping bonds for new securities.
‘Strict Attitude’
Since then, an economic contraction that exceeded estimates
has made the goal of cutting Greece’s debt to 120 percent of
gross domestic product by 2020 more difficult. An accord with
private investors is tied to a second bailout for the country,
which faces a 14.5 billion-euro bond payment on March 20.
Greek Finance Minister Evangelos Venizelos told reporters
in Brussels on Jan. 24 that the government intends to wrap up
the debt-swap talks with private investors by Feb. 1. European
Union leaders hold a summit on Jan. 30.
Greece’s private bondholders had made an offer that would
lead to a loss of about 69 percent on the net-present value of
Greek bonds, two people with knowledge of the talks said on Jan.
23. The new 30-year bonds would carry an average coupon of about
4.25 percent, said the people, who declined to be identified
because the talks are private.
European finance ministers meeting in Brussels signaled
they would push Greece’s private investors to accept bigger
losses, with coupons below 3.5 percent for debt to be serviced
until 2020 and below 4 percent over the 30 years of the next
Greek package.
“I can understand the strict attitude creditors are
taking,” Andreas Plaesier, a Hamburg-based banking analyst at
M.M. Warburg, said by phone. “Greece’s behavior could well lead
you to believe that this isn’t the last step and that other
writedowns could follow. There’s also the concern over whether
other countries like Portugal will seek to have their debt load
lightened.”
‘Willing to Negotiate’
Greek newspaper Kathimerini, without saying how it got the
information, reported yesterday that Dallara will make a
proposal that the new bonds carry a weighted average coupon of
3.75 percent.
After a meeting of the creditors’ steering committee on Jan.
25 in Paris, Greek bondholders sent a team of experts to Athens
to continue negotiations with the Greek government on the debt
swap, with the goal of agreeing on all outstanding legal and
technical issues as soon as possible.
“At the end too much is at stake here for Europe in terms
of contagion, but also I think for the global economy,”
Ackermann told CNBC. “We need someone on the public sector who
can really make decisions, and finally, I think we are getting
closer to that. We are willing to negotiate.”
‘Tug of War’
“There are always tensions and a tug of war in these
areas,” Irish Prime Minister Enda Kenny told Bloomberg
Television in Davos on Jan. 25, when asked about the struggles
over the swap. “The end result of all this should be strong
leadership, decisiveness from a European perspective, a focus on
growth and jobs, which can grow the economies of Europe and can
have the European market achieve the full potential of the
single market.”
Dallara said on Jan. 24 that all parties, public and
private, should contribute to cutting Greece’s borrowings.
Private investors hold only about 60 percent of Greece’s 350
billion euros of debt, he said. Christine Lagarde, a former
French finance minister who is the IMF’s managing director, said
that European governments and other public holders of Greek debt
may have to increase support if private creditors don’t go far
enough.
Michael Meister, the deputy floor leader for German
Chancellor Angela Merkel’s Christian Democrats and the party’s
ranking finance spokesman, rejected suggestions that the
European Central Bank take losses on its Greek debt holdings. He
spoke in a Jan. 25 interview.
‘Every Institution’
While the ECB faces pressure to join private-sector
investors in accepting losses on Greek debt, the central bank
sees any participation as risking damaging confidence in the
institution, two people familiar with the Governing Council’s
stance said. The debt was acquired for monetary policy purposes
and the ECB is firmly opposed to any restructuring, they said on
condition of anonymity because the matter is confidential.
“If we extinguish the fire in Greece with a good solution,
everybody, and I’m not mentioning any names here, but every
institution should contribute to solving that problem, everybody
who has a stake in it,” Ackermann said.
ECB President Mario Draghi said on Jan. 19 that the ECB is
“not party” to discussions between the Greek government and
the private sector. An ECB spokesman declined to comment.
The creditors’ steering committee negotiating the debt swap
includes representatives from banks and insurers with the
largest holdings of Greek government bonds, including National
Bank of Greece SA, BNP Paribas, Commerzbank AG, Deutsche Bank AG (DBK),
Intesa Sanpaolo SpA (ISP), ING Groep NV (INGA), Allianz SE (ALV) and Axa SA. (CS)
Financial firms on the IIF’s private-creditor investor
committee, a larger group of 32 members that includes the
smaller steering committee, hold more than 47 billion euros in
Greek sovereign debt, according to data compiled by Bloomberg
from company reports.
To contact the reporters on this story:
Nicholas Comfort in Frankfurt at
ncomfort1@bloomberg.net;
Elisa Martinuzzi in Davos, Switzerland at
emartinuzzi@bloomberg.net
To contact the editor responsible for this story:
Frank Connelly at
fconnelly@bloomberg.net
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Article source: http://www.bloomberg.com/news/2012-01-26/ackermann-says-greek-outcome-still-open-confident-on-solution.html