Today, the Prime Minister of Greece, Lucas Papdemos announced that the country’s creditors had agreed to take pennies on the euro by writing down the debt. By doing this, Greece can avoid filing bankruptcy and get a second bail out that will hopefully keep the euro zone from sliding into economic chaos.
Greece only had two weeks left to come up with something and avoid default on their debt causing bankruptcy. Without any kind of deal, financial analysts believed it would cause turmoil in the stock markets that would cause major problems with the 16 countries in the euro zone.
By writing down the debt, Greece will eliminate €105 billion off of its €368 billion debt load. In an interview, Lucas Papdemos stated, ”For the first time, Greece is not adding but taking debt off the backs of its citizens.”
A spokesperson from Greece said 83.5% of investors holding the government debt agreed to the bond swap. This reduced the value of their investment by one half while also accepting easier repayment terms for Greece. Some people are saying it wasn’t a very good deal for the investors, but what other choice do they have.
Charles Dallara negotiated the deal with the Greek government on behalf of the larger investors. Many are saying this is the largest debt restructuring and bond swap ever outside of a bankruptcy filing. All of the creditors holding Greek bottoms who refused to sign up for the deal will now be forced to accept the outcome. In essence, this is forcing losses on some of the bondholders who refused. The debt relief program will trigger payouts of the credit default swap.
Because of austerity measures and everything else being forced on the people of Greece, many people felt filing bankruptcy would give Greece a chance to completely start over from scratch. The first step would be to get off the euro and go back on their own currency. There would be a huge shakeout in real estate values and investments. With great values from newly de-valued currency, tourism and investment in real estate would quickly put the ailing nation back on their feet.
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