Greeks & Diaspora Bond Holders Will Take Big Losses Too

ATHENS  – Greeks and those in the Diaspora who bought Greek bonds to support Greece during its economic crisis will not be exempt from an agreement the government made with private investors to write down the country’s debt and will suffer big losses too, the head of the Eurozone, Jean-Claude Juncker said. “There can be no compensation given to Greek bond holders because tens of thousands of citizens of other countries who hold Greek bonds should be given a compensation too,” he said.

Some 11,000 Greeks who invested 3 billion euros ($3.9 billion) in Greek bonds, as well as those in the Diaspora, will be repaid only 53.5 percent of their holdings and be issued new bonds with a rate of interest ranging from 0.6-3.36 percent and with a duration of six months to 30 years, meaning they may not see repayment until 2042. For example, holders of 10,000 euros in previous Greek bonds, which are now worthless, will receive only 5,350 euros with the remainder subject to the new interest and repayment terms.

The so-called Private Sector Involvement (PSI) was an arrangement in which investors were forced to accept what the government offered them or lose even more and was a condition of Greece receiving a second bailout from the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) of $172 billion. Greece is surviving on a first rescue package from the Troika of $152 billion. The PSI technically put the county in default, however.

Greek Finance Minister Evangelos Venizelos had previously hinted that Greeks and other private citizens holding Greek bonds might get favorable treatment but backed away from that after meeting with Juncker, who said he didn’t want a precedent set as some bondholders who refused to voluntarily accept the PSI deal are planning to sue to recover their losses.

Venizelos later said he may try to raise the question again. “This is the decision of the Eurogroup,” said Venizelos. “We will discuss the issue further in Athens.” Speaking to SKAI TV on March 13, Deputy Finance Minister Filippos Sachinidis refused to provide any guarantees of further compensation for Greek investors but did not rule out the possibility. “Mr. Juncker expressed the view of the Eurogroup,” he said “From the start, we said all the bonds would be part of the restructuring process. The question of what the Greek government will decide beyond that, we will see in the future.” He too noted the coming lawsuits and said Greece didn’t want to show favoritism. “We cannot comment any further on that issue at the moment as we are due to face legal action from a number of bondholders,” he said. “We have to protect Greece from legal action,” he added, according to the newspaper Kathimerini.

“At this moment what we are doing is the protection of our country itself,” Sachinidis added. He told SKAI TV that private bondholders should not expect to be paid in full, including those who bought them in secondary markets as investments. The newspaper Proto Them said that, “The PSI may have averted a Greek default but it left behind thousands of victims, those who invested in Greek state bonds either because they trusted their country or in this way they were compensated for services they had rendered or for products they had sold to companies and public organizations.”

Some civil servants preparing for retirement said they were told they might not get the lump sums they earned over their lifetime of working but would be issued the bonds too, even though some would be unlikely to live long enough to get their money. Greece had planned to issue $3 billion in separate Diaspora bonds but held off on those, which saved potential investors in the Greek American community and in other countries from suffering losses as well.

Lawyers in Germany representing 110 Greek bond holders said on they have formed a class action group and intend to sue banks and the Greek state following last week’s bond swap, Reuters reported. The Hamburg legal firm said most of the investors had spent 100,000-500,000 euros ($130,000-$653,000) on Greek paper, although the highest investment reached 3 million euros, or $3.9 million. The suit, likely to be filed in Washington, will claim banks failed to properly advise clients about the risks of Greek paper and seek compensation. Separately, lawyers will argue that Greece, in orchestrating a debt swap, infringed against a German-Greek investment treaty intended to protect German investors from political risk. Lawyer Matthias Groepper of legal firm Groepper Koepke said those who had agreed to the terms of the debt swap would be unable to claim compensation, Reuters said.

On March 12, Greece completed the exchange of 177.2 billion euros ($231.4 billion) of bonds issued under Greek law as part of its debt-restructuring plan, the Public Debt Management Agency said. Under the exchange, private-sector investors swapped their old bonds for new ones with less than half the face value, lower coupons, and longer maturities, effectively writing off $134 billion in Greek debt holdings, according to Dow Jones. “By delivering the consideration described in the invitations (made,) the Republic discharged in full its obligations to the holders of the Republic’s amended Greek-law bonds,” the agency said in a statement without mentioning the losses the investors would be taking.


  • Kewlo

    The comment “By delivering the consideration described in the invitations (made,)
    the Republic discharged in full its obligations to the holders of the
    Republic’s amended Greek-law bonds.” is about as cynical as the come in view of the fact that small investors who did NOT agree to accept major losses (and often held bonds maturing only a few days after the forced action) had their investments expropriated against their will. Notable is also the fact that the ECB was NOT forced to participate in the expropriation, but will be repayed in full when its Greek bonds mature. The fact is that Greece has defaulted, and has furthermore – for political reasons – favored one group of investors over others. The anger among small private investors is understandable and lawsuits against the high-handed action of the Greek government certain.

  • Mariarizescu

    That pig of Jean Cluade Junker, has to take notice of this: it is not his money but ours, and legal action will bring  Euro Groups in front of all he High Courts, in Italy, in Germany and every where. I did not spculate, buying greek papers at 99/100, and investing 95.000 Euro, my life duration savings. It will not finish here