The government and its private creditors are reportedly edging ever closer to a deal on the private sector involvement plan (PSI+), although the International Monetary Fund appears reserved regarding the plan?s effectiveness.
The deterioration in the global economy and the specter of a banking crisis in the eurozone have forced private holders of Greek bonds to accept more painful terms than they were prepared for until the end of 2011.
Banking sources said the agreement to be reached soon will accept the nominal 50 percent haircut on Greek debt agreed at the October 27 eurozone summit, with the impact on net present value not exceeding 60 percent. The new bonds will have a coupon ranging from 4 to 5 percent.
IMF officials, on the other hand, are expressing worries about the plan and urging more drastic moves so as to render the Greek debt sustainable as they consider the 50 percent haircut insufficient, although that might turn the involvement of the private sector from voluntary to compulsory and trigger payouts of credit default swaps.