Haircut for private bondholders too

The government is on a race to implement the new haircut program, aiming to achieve its sustainability target, that is 120.5% of the GDP by 2020. 

As announced by Finance minister Evangelos Venizelos, this will also start the process for a haircut on all bonds held by individuals, be they private persons or bonds given as security for the loan of public utilities or for debt payment to supplier companies.

But especially concerning the approximately 9,500 minor bondholders with amounts up to 100,000 euros, the minister said they might be covered individually, possibly with an indemnity against their losses. According to information, private investments in bonds up to 100,000 euros will be covered by TEKE, as happens with bank deposits up to this amount.

But this brings a major issue, as only a few weeks ago - and before the negotiations on the haircut reached the final agreement - the government emphasized that the bonds of minor investors will not be tampered with. The problem is exacerbated as such bonds were used to pay pharmacists and pharmaceutical companies (after the 30-40% haircut imposed on the total amount owed by the state), and other categories of workers such as former employees at Olympic.

It is worth noting that neither during the Argentina default, when the final haircut reached 99%, were the bonds of individuals tampered with, since such a move amounts to a credibility blow for the government and especially its future ability to resort to internal borrowing.

Regarding the completion of the debt exchange, it is estimated that the announcement about a voluntary participation call will come by Friday, and by February 29 the implementary laws will have to be voted on in parliament.

On March 9 officials will consider whether the participation of individuals has reached 66% of bondholders, which is the informal limit set for the activation of CACs.

The exchange of the bonds will be held on March 12, the formal approval of the new loan agreement by all member-states is expected on March 14 and the money will have to be in the special closed account by March 19.