Greek Bond Swap Edges Closer to Approval

Major banks and pension funds threw their weight behind Greece's bond swap offer to private creditors on Wednesday, raising the likelihood that the deal will go through and a 130 billion euro international bailout package would be secured.

A group of 30 banks and funds representing 39.3 percent of Greece's 206 billion euros of outstanding debt said they would take part in the deal, joining other Greek banks and pension funds which have already pledged to accept the offer.

Athens, totally reliant on international support to stave off bankruptcy, has asked its private sector creditors to accept steep losses on their Greek bond holdings as it fights to cut a public debt burden of 160 percent of gross domestic product.

Banks, insurers, pension funds and others are being asked to give up almost three quarters of the value of their investments, in return for new Greek bonds. If they do not accept the offer, Greece has threatened to pay them nothing.

With just over a day to go before the offer expires at 2000 GMT on Thursday, the latest commitments bring the declared total closer to the two thirds minimum level needed for Greece to enforce losses on any holdouts, ensuring the deal goes through.

The bond swap must succeed for the European Union and International Monetary Fund to sign off on a 130 billion euros ($170 billion) bailout package agreed last month, which Greece needs to stave off bankruptcy.

After months of tortuous negotiations, many of the big institutional investors had said they would accept the deal but senior bankers and officials remained cautious ahead of the deadline.

"About the private sector deal - I don't have a crystal ball. I cannot predict this with certainty. But I repeat, for us, this is a condition," Dutch Finance Minister Jan Kees de Jager told parliament.

French bank BNP Paribas' Greek debt negotiator was also uncertain.

"It is impossible to be certain of the outcome of such a process," Jean Lemierre told Le Monde newspaper. "But the success of the offer is in everyone's interest."

Only 177 billion euros of the debt are covered by Greek law and it was not immediately clear how much of the debt covered by Wednesday's commitment was under Greek law and how much under international law.

Athens only has the power to enforce losses on holders of bonds written under Greek law, not the 10 percent or so of its debt covered by English or other international law.


Euro zone debt crisis graphics



Worries about the bond swap lifted demand for German bonds at an auction on Wednesday, as investors sought a safe haven for their money before the deadline and the settlement of the deal on Monday.

Financial markets have got more jittery the closer the Greek bond deadline has got.

Euro zone finance ministers are due to decide whether to release the 130 billion euros package during a conference call on Friday.

Thursday's deadline is the most important remaining hurdle to be cleared for Greece to receive the funds that it urgently needs to keep paying its bills while it seeks to push through deep structural reforms of its shattered economy.

"The first wave will show whether we can complete the bailout agreement to cover the country's funding needs," Finance Minister Evangelos Venizelos told Greek radio.

Athens needs to have the funds by March 20, when it must meet redemption payments on 14.5 billion euros of bonds falling due.

Now in its fifth year of deep recession and facing years of bleak austerity, Greece has staggered from one deadline to another since the euro zone crisis blew up in 2010.

Underlining the problems facing the economy, the head of SETA, the association representing Greece's vital tourism sector, said pre-bookings from the key markets of Germany, the Netherlands and Sweden were down by 20-30 percent this year.

Following repeated waves of strikes and sometimes violent protests in Athens and other big cities, Greeks have become increasingly disillusioned with politicians ahead of elections expected by early May at the latest.

On Wednesday, prison guards kicked off a series of 24 hour rolling strikes in protest against worsening conditions in the country's already severely overcrowded prisons. Greeks also booed politicians and threw yogurt during a parade on the island of Rhodes.

($1 = 0.7625 euros)