No deal on debt rollover in Paris
There was no sign of agreement at the Paris meeting of Greek-bond holders on Wednesday, with decisions postponed until September. At the same time, a German proposal for a debt swap returned to the table.
Foreign banks and insurers met in the French capital under the auspices of the International Institute of Finance (IIF), but there were reportedly various points of disagreement among them. Their focus was on how to implement the French plan for a Greek debt rollover without the rating agencies declaring Greece as having a default status.
Banking sources said many issues involving credit ratings, interest rates, maturities and accounting consequences still needed to be ironed out among multiple stakeholders and any deal would only be likely in September.
Rating agencies have warned they would be likely to treat any ?voluntary? rollover of Greek bonds as a distressed debt exchange and declare it, at least temporarily, to be a selective default. French banks have offered a plan under which banks would roll over about half of Greek debt that matures in 2011-14, putting another 20 percent into a ?guarantee fund? of zero-coupon AAA bonds, and cashing out the remaining 30 percent.
German Deputy Finance Minister Joerg Asmussen put Berlin?s alternative proposal for a debt swap extending existing bonds? maturities by seven years back on the table yesterday, even though the European Central Bank has warned against it.
The IIF chief offered a more flexible approach, suggesting that Greece?s efforts to emerge from its sovereign debt crisis could include a temporary default as part of a longer-term recovery plan.
Charles Dallara, the managing director of the IIF, said financial markets will, over time, recognize that Greece faces a different set of problems than Ireland or Portugal, which also needed aid from the European Union and International Monetary Fund. In an interview with Bloomberg in Paris on Wednesday, Dallara said market participants shouldn?t be ?fixated? on comments from any one rating agency.
Another positive voice from Paris came from Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development. The OECD chief said Greece will overcome its fiscal problems and that ?there is life after debt,? suggesting the Greek problems are similar to those that his country, Mexico, managed to overcome.
Also on Wednesday, the IMF?s new managing director, Christine Lagarde, confirmed that the fund?s board will meet on Friday to discuss the next round of aid to Greece.
