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BY KATIE BRENNAN
You're watching multisource world politics video news analysis from Newsy.
Greece is still struggling to stay afloat in the European economy, but may pull out of the one plan in the works to keep it alive. The Financial Post explains...
“Greece warned on Friday it may opt out of a debt swap crucial to its second international bailout if too few investors rally behind it raising the ante on the stricken country’s 150 billion euro ($215 billion) lifeline.”
The swap requires investors to accept longer-dated plans than they had purchased, making it a little easier for Greece to repay the bonds. Greece said Friday-- if its target percentage of private sector investors do not participate, it will walk away from the deal. Euronews has the details...
“The Greeks want 90 percent of private sector investors to agree to the deal. So far only 60 to 70 percent have said they would. The debt swap involves banks that hold Greek Government bonds taking more that 20% loss on those holdings.”
Despite possible losses, most European banks are willing to participate in the debt swap. But CNBC explains why some bond holders are hesitant to give up their assets.
“The question is is that some of the debt is held outside of Europe where the political pressure just isn’t as strong for bond holders to suck it up and accept some losses. So that is kind of the trickiest issue right now is if Greece will agree to do this debt swap if they don’t get the participation level they want.”
Greece says without 90% participation from the private sector, the deal wouldn’t save it much money. The New York Times says:
“According to initial estimates, the bond swaps and rollovers were meant to save the Greek government some €37 billion by 2014, reaching a total of €54 billion by 2020. However, much of those savings would be eaten up by the cost of the collateral, so a lower participation could quickly eliminate the benefits.”
The Greek government has asked foreign finance ministers to help determine which institutions in their countries hold Greek bonds. If this deal fails, the European Union or International Monetary Fund will have to come up with a new plan to save Greece’s economy.
Transcript by Newsy.
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