The Banking and Strategy Initiative

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European Sovereign Debt Crisis: New Cuts, Haggling over 123-124% targets

Of course not that the paperwork makes the new targets any more achievable but currently after creditors take a new 70% haircut, the debt to GDP ratio is wthin the flexi target but no the hard target of 120% , so Greek negotiations are still on with private debt holders. Int he Foreign ministers’ meeting a new savings of $429 mln was announced.

Private Creditors’ Terms as of today ask for a 53.5% haircut and no contribution in terms of loss acceptance by ECB still sticking out as a sore point. (Telegraph)

Private bonds coupons 3% from 2012 – 2020 and 3.75% from 2021, Reuters thinks Debt ratio could easily still be 160% if no asset sales etc.

European Central BankA number of measures, including restructuring the accrued interest portion, reducing the “sweeteners” and having euro zone central banks take part in the debt swap are being considered to move the figure closer to 120 percent. from a 129% per the debt sustainability report circulated in Athens last week

The first tranche of debt may also carry lower coupons now. The troika of European Commission, ECB and IMF, responsible for monitoring Greece’s reform progress, carries out quarterly reviews and could decide Athens is not meeting its commitments at any one of them. Further cuts will make matter worse, as the Greek GDP already shrank by 7% in December 2011 (Q4,ttm)


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