STOCK MARKET WATCH -- Friday, 13 January 2012

[Demeter]

73. Greek bond swap falling short

http://uk.reuters.com/article/2012/01/12/uk-eurozone-greece-idUKTRE80A1VT20120112

Talks about private sector creditors paying for part of a second Greek bailout are going badly, senior European bankers said on Wednesday, raising the prospect that euro zone governments will have to increase their contribution to the aid package. "Governments are mulling an increase of their share of the burden," said one of the bankers, who is familiar with the talks. An IMF source told Reuters if the deal with private bondholders does not help reduce Greece's debt, then Europeans would have to provide more financing for the next rescue package or the IMF may be unwilling to commit more money for Athens.

Banks and investment funds have been negotiating with Athens for months on a bond swap scheme to cut Greece's debt burden from 160 percent of the nation's annual output to a more manageable 120 percent by 2020. This is central to a second, 130 billion euro (107 billion pounds) bailout that international lenders have drawn up to help the country avert default.

As part of these talks, banks have agreed to a "voluntary" 50 percent write-down on Greek debt holdings but have faced demands to make further concessions, a factor that has made it less attractive for some of the investors to take part on a voluntary basis.

The participation rate among private sector investors is currently less than 75 percent, which means Greece's debt will be reduced by far less than expected, the source said....MORE