Greece Needs Loan to Buy Back Debt

Greece’s complicated loan deal with international lenders includes a scheme to let Greece buy back some of its debt at a big discount, but Finance Minister Yiannis Stournaras said the government would need to borrow as much as $18.18 billion to fund the voluntary plan.
Creditors said the buyback must be completed before $56.7 billion (44 billion euros) in a first series of installments as part of a second bailout of $173 billion begin being released next month and in the first quarter of 2013.
“It is our patriotic duty to make the scheme succeed,” Stournaras told a press conference. “It must succeed.” Greek banks are already resisting the plan and Stournaras denied reports that the government would issue Treasury bill to raise the money and instead that instead it would come from the European Financial Stability Facility.
He wouldn’t answer whether success of the plan was a condition of the loans being released but said that if there is not enough voluntary participation that there is a back-up plan whose details he wouldn’t reveal.
The new loan is on top of the 44 billion euros that Eurozone and International Monetary Fund officials earmarked for Greece at a Eurogroup summit this week but it has been factored into a debt sustainability analysis, which sees Greek debt shrinking to 124 percent of Gross Domestic Product from around 175 percent now, Stournaras said. The details of the scheme are to be revealed next week and the Reuters news agency reported that it will be managed by Deutsche Bank and Morgan Stanley.
Stournaras said the deal had helped secure Greece’s position in the Eurozone and its prospects for economic recovery but he noted that it is “no cause for celebration.” He added: “Now the hard part begins.” It was also reported that Eurozone central banks may roll over their holdings of Greek debt, which would reduce a funding gap for the 2013-16 period from $9.86 billion (7.6 billion euros) to $7.27 billion (5.6 billion euros).

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