Greece's Debt-Swap--Signs for the Future?


The Eurozone Debt Crisis has been around the news for a long time, and yesterday (Friday, March 9) there was a new progress: Greece sealed a historic 206 bn (USD266 bn) debt restructuring deal. Over 83% private sector bond holders in Greece agreed to change their bonds to new ones at less than half their value in order to prevent a disorderly default. Once the collective action clauses (clauses that allow decisions made by majority of creditors to be binding for all creditors) are added into the bond contracts, the response rate will be increased to 95.7%, which means Greece could lower the negativities in the debt-swap plan.

This restructuring is the largest sovereign-debt default in history and is the first one in Western Europe in half a century. While it is an integral part of a second, 130 bn bailout loan for Greece, it will trigger pay outs for CDS (credit-default swaps, contracts that pay off if creditors suffer default). In any case, this I believe this debt exchange signals a strong result that gives more time for Greece to move on with more economic reform programs. It allows the world’s economy to stabilize and thus allow more effective implementation of the bailout loan in Greece’s rescue package.


Sophie Tam