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Bank group confident of meeting Greek bailout goal

Bank group confident of meeting Greek bailout goal

The head of a banking group that has been leading negotiations with private creditors to contribute to a second bailout for Greece said Tuesday he is confident enough of them will participate.
However, it will take several weeks to get a final toll of how many banks and other financial firms are willing to give Greece easier lending terms, said Charles Dallara, managing director of the Institute of International Finance.
Greece has said that private creditors have to commit to roll over or swap at least 90 percent of their Greek bond holdings maturing through 2020.
The new bonds will have a lower face value or interest rate and will give the debt-ridden country more time to repay them.
The swap and rollover deal is a key element of a second, (EURO)109 billion ($155 billion) aid package for debt-ridden Greece. On July 21, when eurozone leaders agreed on the rescue, the IIF said it was aiming for a takeup of 90 percent, which would save Greece some (EURO)54 billion by 2014 and (EURO)135 billion by 2020, although much of the savings are just deferred payments.
Since then, the government in Athens has increased the pressure on private creditors, threatening to abandon the deal if not enough of them sign up.
While eurozone leaders and the IIF claim that the deal will make Greece's debt, which is approaching some 160 percent of GDP, more sustainable, getting banks and investment funds to participate comes at a steep cost.
Greece has to spend some (EURO)42 billion to set up a collateral fund to secure the new bonds. Because the collateral is expensive, the bond swap deal will be advantageous for Greece only if there is a strong participation by the private creditors.
Dallara, who was speaking a press conference in Washington, said Greece's initial "exchange of information" on the different swap and rollover options will end Friday, when a formal offer will be made to the participating firms.
He also stressed that he did not expect Greece to default on its remaining debt. "Greece has made an important effort in the past year and a half," Dallara said, defending the government against growing criticism in the eurozone for not meeting deficit targets promised in return for the rescue loans.
The contribution of the private sector is just one of the elements of the aid to Greece that has raised concerns in recent weeks. Last Friday, the country's debt inspectors unexpectedly suspended their review of the country's reform efforts amid disagreements over Greece's deficit figures for 2011 and 2012.
Without a positive assessment from the European Union, the European Central Bank, and the International Monetary Fund, Greece won't receive the next (EURO)8 billion installment from its first aid package and would likely default on its debts within weeks.