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Papademos Urges Greece: Don't Waste This Chance

Greece's interim Prime Minister Lucas Papademos (L) and Finance Minister Evangelos Venizelos made investors take a big loss

ATHENS – With the biggest restructuring of public debt ever agreed upon, writing off $134 billion in Greece’s debt but at the cost of a technical default, interim Prime Minister Lucas Papademos said he doesn’t want Greece to return to its profligate ways and lose the chance to save the country. Papademos said the deal, in which investors in Greece were forced to take 74 percent losses, may have been bad for them and ruined the country’s credit, but was nonetheless a “window of opportunity and hope.”
Papademos is overseeing a hybrid government of bitter political rivals of PASOK Socialists and New Democracy Conservatives who agreed to the terms of a second bailout from the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) of $172 billion – that was dependent on Greece concluding the Private Sector Involvement (PSI) deal with creditors. It also included more of the austerity measures that have created a deep recession of 21 percent unemployment and the closing of more than 111,000 businesses with more closing every day. There are more than 1,040,000 people now without a job and with public and private sector workers subjected to big pay cuts even though well-connected workers, particularly those attached to PASOK, are receiving big raises.
“From within a deep recession, and the trials of the Greek people, there rises the hope for an exit from the worst crisis since World War II,” Papademos said in a televised speech the night of March 9. With European leaders publicly declaring their mistrust of Greece and lack of confidence in the political leadership being able to rein in spending and a ceaseless culture of corruption and waste, he said he had heard those warnings. “We do not have the right to waste the money that we will save in interest and debt repayments,” the premier said. “We must use it to modernize our infrastructure, make our economy more competitive, put the state in order.” Critics believe the bailouts, including a first for $152 billion that is still ongoing, and the debt write-down, gives the Greek political structure a green light to keep on wasting money in the belief that Eurozone will come to the rescue again.
The debt swap, and the expected approval of the second bailout for Greece in the next two weeks, will help the country emerge from the “quicksand of the past few months,” the premier said. “For the first time Greece is not adding to but reducing the debt burden on its citizens and the next generations,” he said. Finance Minister Evangelos Venizelos, who has doubled income and property taxes and taxed the poor while the government hasn’t prosecuted major tax evaders costing the country $60 billion, said, “We owed it to our children and grandchildren to rid them of the burden of this debt.” When some investors refused to along with taking losses – including Greek pension funds holding $4.4 billion in suddenly worthless Greek bonds before the swap, he activated Collective Action Clauses (CAC’s) forcing them, driving up the percentage of agreement to 95.7 percent. Venizelos said Greece shouldn’t be expected to pay back its loans.
The investors held $269 billion in Greek bonds. The write-down deal came with a backlash of default declared by credit agencies and triggered a potential windfall for hedge fund speculators who had bet Greece wouldn’t pay its investors and could cash in unless Greece moves to block them as Venizelos promised. The International Swaps and Derivatives Association (ISDA) issued a statement saying that the debt swap constituted a “credit event” which would prompt payouts on credit default swaps, a type of insurance against sovereign bankruptcy taken out by investors.
(Source: Kathimerini)

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