The deal would reduce Greece’s annual interest expense on the bonds from about $10 billion to about $4 billion. And when the bonds mature, instead of paying bondholders (euro) 206 billion, Greece will have to pay only (euro) 103 billion.
By DEMETRIS NELLAS
Associated Press
ATHENS, Greece — A disorderly and potentially devastating Greek debt default is looking much less likely.
Greece and investors who have bought its bonds have reached a tentative deal to significantly reduce the country’s debt and pave the way for it to receive a much-needed (euro) 130 billion bailout.
Negotiators for the investors announced the tentative agreement Saturday and said it could become final next week. If the agreement works as planned, it will help Greece remain solvent and help Europe avoid a blow to its already weak financial system, even though banks and other bond investors will have to accept multibillion-dollar losses. Still, it doesn’t resolve the weakening economic conditions Greece and other European nations face as they rapidly rein in spending in order to get their debts under control.
Under the agreement, the (euro) 206 billion worth of Greek bonds that investors own would be exchanged for new bonds worth 60 percent less.
Private investors would receive new bonds whose face value is half of the existing bonds. The new bonds would have a longer maturity and pay an average interest rate of slightly less than 4 percent. The existing bonds pay an average interest rate of 5 percent, according to the think tank Re-Define.
The deal would reduce Greece’s annual interest expense on the bonds from about $10 billion to about $4 billion. And when the bonds mature, instead of paying bondholders (euro) 206 billion, Greece will have to pay only (euro) 103 billion.