Athens talks tough on debt swap

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Athens talks tough on debt swap

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Greece is warning that it may not go ahead with a debt swap that is crucial to its second international bailout if too few investors participate in it.

Athens says it wants 90 percent of private sector investors to agree to the deal. So far only 60 to 70 percent have said they would according to the Institute of International Finance, a bank lobby group that is coordinating the talks.

The debt swap involves banks that hold Greek government bonds taking a 21 percent loss on those holdings.

In a formal letter of inquiry to other governments, the Greek government wrote: “If these thresholds (or either of them) are not met, Greece shall not proceed with any portion of the transaction.”

Greece had previously set the 90 percent threshold — which applies to the holders of Greek bonds maturing by both 2014 and by 2020 — as a target, not a condition.

But Athens left itself some room for manoeuvre, saying that it would only pull out of the deal if the take-up failed to satisfy its international partners, such as the European Union and the International Monetary Fund.

This would be the case “if it determines, in consultation with the official sector, that the total contribution of private sector creditors … is insufficient to permit the official sector to support the new multi-year adjustment programme.”

“It’s a tactical move. They want to put pressure on private investors to participate,” said a senior official at a Greek bank, who asked not to be named. He said that reaching 90 percent looked ambitious, though he expected the offer to go ahead even if the level wasn’t reached.