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IIF: Bond Swap Marks Important Step To Resolving Greek Crisis

Charles Dallara

The Institute of International Finance, a lobby group for the world’s largest banks, welcomed the results of the Greek debt swap on Friday, saying it will help stabilize the euro-zone economy and allow Greece time to implement reforms and eventually return to bond markets.
“The very strong and positive result provides a major opportunity now for Greece to move ahead with its economic reform program, while strengthening the Euro Area’s ability to create an economic environment of stability and growth,” said Josef Ackermann, Chairman of the IIF Board of Directors.
Greece’s finance ministry announced Friday there was an average 83.5% participation rate in a debt swap on a total of EUR206 billion in Greek bonds. The ministry said that would be lifted to 95.7% once so-called collective-action clauses are activated.
The IIF statement noted the “very high majority of private creditors and investors to Greece” that accepted the Greek government’s debt offer. The IIF stressed this was done on a “voluntary basis.”
IIF Managing Director Charles Dallara said the exchange amounts to the largest ever sovereign debt restructuring and is likely to lead “to a most substantial reduction in the debt stock of Greece and a very significant decline in the amount of maturing debt to be refinanced between 2012 and 2020.”
This will bring “formidable benefits to Greece,” Dallara added.
He said the strong results underline the importance of “voluntary, good faith negotiations” in a debt crisis and “reduces the risks of contagion in the markets.”
In a separate statement, the IIF said the results of the debt swap “will catalyze the strong financial official sector support for Greece’s new three-year reform program.”
Euro-zone finance ministers will speak later Friday to discuss the results of the Greek debt swap and Greek reform pledges. Greece is still waiting for final euro-zone sign off on a EUR130 billion second bailout package.
(source: Dow Jones)

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