Banks play hardball in PSI talks

Top-level officials from banks holding Greek debt are expressing reserved optimism about the successful completion of negotiations regarding the new private sector involvement (PSI+) plan in the coming weeks.

?Negotiations are advancing, there is progress and all signs point to an agreement on PSI being completed within the next two to three weeks,? the same sources told Kathimerini.

Wednesday saw a teleconference between representatives of the lenders participating in the Creditor Committee conducting the negotiations with the government. The Greek banks taking part are National, Alpha and Eurobank EFG.

However, even a swift agreement does not guarantee the level of private sector involvement, which is essential for the implementation of the decisions reached at the eurozone summit on October 27.

Other sources argue that in the last few days, International Monetary Fund technocrats raised serious worries about the sustainability analysis of the Greek debt, as published on December 13, given the deterioration of financial conditions and the threatening proportions the debt crisis has taken on in the eurozone.

Bloomberg reported yesterday that creditors are resisting pressure from the IMF to accept bigger losses and want the 70 billion euros of new bonds the government will issue in return for existing securities to carry a coupon of about 5 percent.

Bank officials underscore the absolute need for the successful completion of PSI, saying that otherwise the problems could prove insurmountable for the Greek government. At least an agreement has been reached on the new bonds being governed by British rather than Greek law.

The departure of Spanish fund Vega Asset Management from the Creditor Committee on Tuesday is indicative of the different approaches to the issues that still have not been agreed on by the two negotiating sides. It was made known on Wednesday that the Spanish fund threatened to use legal means if the haircut on Greek bonds exceeds the 50 percent rate agreed on October 27 in Brussels.

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