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Greece swaps bonds worth $232.5 billion

Although the exchange will keep Greece solvent, markets were underwhelmed amid fears that the country's debt load still remains far too heavy.

twitter-logoPTI | March 13, 2012 | Updated 11:23 IST

Greece implemented the biggest debt writedown in history on Tuesday, swapping the bulk of its privately-held bonds with new ones worth less than half their original value.

Although the exchange will keep Greece solvent and at the receiving end of billions in international rescue loans, markets were underwhelmed amid fears that the country's debt load still remains far too heavy.

A Finance Ministry statement said bonds issued under Greek law with a total face value of $232.5 billion were exchanged. A smaller batch worth $37.5 billion, issued under foreign law or by state enterprises, will be swapped in coming weeks.

The debt exchange opens the way for Greece's second international bailout, expected to be finalised this week by finance ministers from eurozone nations. It will also transfer the majority of the country's debt from private into public ownership, its eurozone partners and the International Monetary Fund.

Jean-Claude Juncker, the prime minister of Luxembourg who is also the main spokesman for the 17 countries that use the euro, said he expects the final approval for the bailout on Wednesday, but indicated that was mainly a matter of procedure.

"There is no doubt that the second Greek programme will be approved," he told reporters as he arrived for a finance ministers' meeting in Brussels.

Without the swap and the $172 billion bailout, Greece faced an uncontrolled default on its debts in less than two weeks when a big bond redemption was due.

Though the bond swap will wipe $138 billion off Greece's $485 billion debt mountain, giving Athens breathing space to enact more austerity, many analysts think the country's debt remains unsustainable.

- With agency inputs

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