Greece Nears Debt Write-Off Goal

Posted March 8th, 2012 at 9:45 am (UTC-5)
Leave a comment

Greece is nearing its goal of getting the country’s private lenders to eliminate $142 billion of the country’s debt to help it avoid a default on its financial obligations later this month.

European leaders and financial analysts predicted the Athens government would be successful in winning pledges from its creditors ahead of a deadline Thursday night to cut more than half the money the country owes them. Greek Finance Minister Evangelos Venizelos was optimistic the debt relief deals would be completed.

“Today at midnight, my fellow deputies, a historical procedure is to be completed, a huge, unprecedented,complicated operation that drastically cuts the Greek public debt. If all goes well, tomorrow we will be able to announce that the Greek people, the state, the next generations, will be relieved of 105 billion euros of debt,50 percent of GDP. For the first time in decades, for the first time in the history of the country, we have come together as a parliament, as a government, without our partners and reduced the debt. Historically, every year due to fiscal deficits, even this year, the debt has increased, and now we are making a reverse move which in reality will give back to the new generation, the next generations that which we took from them by over-borrowing.”

Greece has adopted widespread austerity measures, cutting wages and pensions and eliminating thousands of government jobs, to meet the demands of international lenders so it could secure a new $172 billion bailout. It is the country’s second rescue package in two years.

Venizelos said the debt relief will ease financial pressures on Greece and the 17-nation euro currency bloc that has struggled to control Europe’s two-year governmental debt crisis.

“We are lightening the load of the country, we are allowing it to begin a new era. You ask if it was all easy and simple. No, it was all extremely difficult. And until the last minute we have been fighting to solve problems to face speculators in the international markets, to protect the country and for everyone in the eurozone to be protected which is vulnerable to speculative pressures, because this is an asymmetrical war.”

The Athens government says it is hoping that the banks, pension funds and other financial institutions holding 90 percent of the country’s private debt will agree to the write-down. But Greece plans to force the write-down on reluctant creditors even if it only reaches agreement with those holding about 75 percent of the debt.

With Greece planning to pay back the remaining debt over an extended period, the institutions that bought the Greek bonds will ultimately lose about three-fourths of their investments.

Five small Greek pension funds holding about one percent of the bonds eligible for the write-down have rejected the deal, as have several investment funds and Germany’s best-selling newspaper, Bild.