REPORT: Europe Edges Towards Involuntary Greek Bond Swap Deal


Photo: zelig2 via flickr

Greece might change its laws to force bondholders to take massive haircuts on holdings of Greek bonds, according to a Reuters source.Those are the latest headlines to come across the wires.

We doubted last week when a new Greek private sector involvement (PSI) deal was announced that many bondholders would be willing to take a voluntary 50% haircut on Greek bonds.

According to that report, European leaders are becoming less worried about provoking a credit event by forcing private bondholders to take big losses.

Fears that a credit event would have far-reaching consequences have up until now prevented EU leaders from taking drastic measures. However, escalation of the crisis has caused some analysts to think that the size of Greek CDS exposure could be small in comparison to the potential scale of the crisis.

The 50% haircut plan would reduce Greek debt by €100 billion ($139 billion) and, EU leaders believe, put it on the path to fiscal sustainability.

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