While Athens admits that negotiations on the private sector involvement plan (PSI+) — or haircut for private sector investors in Greek debt — have not yet concluded, the European Commission is sending a clear message that the process must accelerate so that the new loan contract can proceed.
Despite the climate of optimism that the Greek side is highlighting, there is still a long way to go. Alternate Finance Minister Filippos Sachinidis told Parliament that ?the law by which the new bonds will be issued remains one of the parameters of the negotiations.?
However, sources suggest that this issue is already settled, with UK law having been chosen instead of the Greek, mirroring the status of the loans of 30 billion euros issued by the European Financial Stability Facility (EFSF) for the completion of PSI+.
In Brussels, Commission spokesman Olivier Bailly stated on Tuesday that right now it is paramount for the PSI+ talks to be concluded so that the eurozone and the International Monetary Fund can reach an agreement with the Greek authorities on the new loan contract. In an effort to put an end to circulating rumors, Bailly noted that there is no ?intention or plan? for a member state to drop out of the eurozone in 2012 or later.
Leading the negotiations on behalf of the private creditors, the Institute of International Finance said on Tuesday that there has been progress in the process and the issue will have to be concluded in the coming days.
The Wall Street Journal suggested on Tuesday that the challenges Greece would face this year will be significant and that it was not clear whether there would be enough investors signing up to PSI+, forcing the country into a disorderly default.
It added that even if there is satisfactory participation, the fear that the PSI+ deal is not sufficient remains, and warned that the IMF could at any moment deem the Greek debt unsustainable and stop supporting Athens.
It is important to remember that if the agreed PSI+ plan is not implemented, then it is virtually certain that the bonds maturing at the end of March, amounting to some 14.5 billion euros, cannot possibly be repaid.