Troika: A sustainable debt requires more investor losses
Bondholders will need to take deeper losses on Greek holdings to make the country?s debt sustainable, according to a report on the country?s finances by international creditors.
The financial situation in Greece ?has taken a turn for the worse? since the last review in June, said the report of the so-called troika dated Friday. That assessment had helped lead to a July agreement that called for investors to take a 21 percent reduction in their holdings? net present value.
Euro-region officials awaited the troika?s findings as the basis for negotiating deeper investor involvement in reducing the country?s debt, an aide to German Chancellor Angela Merkel told reporters today in Berlin. Germany wants a voluntary agreement with banks by an October 26 summit, the official said, speaking on terms of anonymity in custom with government rules.
?Large, long-term, and sufficiently generous official support will be necessary for Greece to remain current on its debt service payments and to facilitate a declining debt trajectory,? said the report.
The assessment by the European Central Bank, the International Monetary Fund and the European Commission, obtained by Bloomberg, said more government aid will be needed and deeper private-sector involvement, or PSI, as is now being considered by European leaders, ?also has a vital role in establishing the sustainability of Greece?s debt,? it said.
Giving scenarios using discount bonds with an assumed yield of 6 percent and no collateral, Greek debt can be brought to just above 120 percent of gross domestic product by the end of 2020 if 50 percent discounts are applied.
?Given still-delayed market access, large scale additional official financing requirements would remain, estimated at some 114 billion euros,? it said. ?To get the debt down further would require a larger private sector contribution? of at least 60 percent to reduce debt below 110 percent of GDP by 2020.
[Bloomberg]
