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Sunday, June 26, 2011

Greece Update: Banks to Propose Rolling over 50% of Debt

by Calculated Risk on 6/26/2011 01:44:00 PM

From the WSJ: French Banks Submit Plan for Greek Debt Rollover

French banks will propose on Monday ... for private creditors to halve their exposure to Greece by rolling over only about 50% of the Greek government bonds they hold ... Under the proposal, financial institutions would effectively reduce their exposure but tie their hands to Greece for a long period by committing to buy up to 30-year bonds ...
Since some analysts were expecting haircuts of up to 70 percent, rolling over half their debt would be a huge positive for the banks.

The Greek parliament is expect to vote on the new austerity package on Wednesday or Thursday. The German finance minister, Wolfgang Schaeuble, made it clear that the next bailout tranche was contingent on Greece passing the austerity package. From Reuters: No Greek budget cuts, no bailout aid -German FinMin (ht jb)
"If the package is rejected, which no one expects actually, then the prerequisites would no longer exist for the IMF, EU and euro zone countries to release the next tranche of aid," [Wolfgang Schaeuble] told German Sunday newspaper Bild am Sonntag.
Although the Greek government is "confident" the legislation will pass, the reaction in the streets - and the market reaction are less certain.