EU Officials: Private Sector Bondholders Could Expect 30-50% Haircut

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Photo: Flickr/Sharon Mollerus

Eurozone officials told Reuters today that the private sector will likely see a 30-50% haircut on holdings of Greek bonds if they participate in a debt swap deal.That’s far more than the 21% that had been expected under the initial terms of the July 21 bailout.

According to these sources, this plan is very much under consideration although it hasn’t been finalised.

“It is still very much in the open and remains to be seen what the initial reaction of private investors will be,” one official said.

While there are some good reasons for bigger private sector involvement (PSI), such a plan could endanger the fragile European banking system by forcing banks to write off even more of their assets.

DON’T MISS: The 20 European banks that are praying that this doesn’t happen >

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