Advancing a Free Society

Greece: Default or No Default?

Friday, March 9, 2012

Yesterday, 83 percent of Greek sovereign debt holders agreed to “voluntarily” exchange their bonds for new bonds with face value of 53 percent of the original bonds. The Greek finance ministry announced that it would invoke the collective action clause to impose the swap on an additional thirteen percent of bond holders who did not agree to the swap. This thirteen percent purchased Greek sovereign bonds under Greek law and are subject to the parliament’s collective action clause. This seems to leave seven percent holdouts who did not agree to the swap and did not purchase under Greek law. What will happen to them remains unclear.

With this “successful” restructuring, the troika monitoring Greece agreed to release a new tranche of bailout funds to stave off a “disorderly” Greek default. These funds will give Greece a short amount of breathing space.

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