Thousands of Greeks become victims of the PSI

Jean-Claude Juncker gave an end to the issue of compensation of thousands of individuals who bought Greek State bonds from the primary market and were forced to accept a cut in the nominal value of their portfolio by 53.5% through the exchange of bonds.

The Eurogroup president revealed that he had received confirmation from the Greek Finance minister Evangelos Venizelos that there will not be any kind of compensation to individuals in Greece who hold Greek government bonds, arguing that this case would create a precedent for other countries.

"We cannot give compensation to the Greek bondholders because then we would have to give compensation to tens of thousands of citizens of other countries who hold Greek bonds," Juncker said.

 This statement will cause disappointment to savers who had put their money in Greek government bonds and believed that they would be exempt from the haircut. In recent days, there were leaks from officials of the Greek government that it considered excluding from the PSI those individuals who have State bonds of up to 100.000 euros - thus securing their initial capital without impairment of the purchased bonds.

Even in this case, the members of the economy staff have made ​​it clear that the setting will not be favorable for individuals who bought bonds at a price below the nominal value of the secondary market.

Other information indicated the possibility of indirect compensation to bondholders by offsetting the lost amount with their debts or liabilities to the State.

Juncker’s statement put an end to all scenarios about compensation of private bondholders. "Everyone with state bonds will get a haircut" is his firm message.

Sachinidis: the important thing is to protect the country

“What’s important now is to protect the country”, said deouty minister of Finance Filippos Sachinidis, indirectly confirming that private bondholders should not expect compensation for their lost capital due to the PSI.

According to information, there are approximately 11,000 individuals who received a 53.5% haircut on the funds they had put in Greek State bonds. It is estimated that the bonds of bondholders inside of Greece are worth 2.3 billion euros, 1.3 billion of which was purchased in public offerings of the State and 1 billion acquired through the secondary market. The value of bonds held by individuals from abroad is 2 billion euros.

How much do private bondholders stand to lose?

Based on the PSI, an individual who bought bonds worth 10,000 euros, immediately loses 5,350 euros and for the remaining 4,650 euros will receive 23 new bonds at interest rates from 0.6% up to 3.65% for a period of 6 months to 30 years.

In simple words, the completion of the PSI might have prevented a Greek default, but it also left hundreds or thousands of victims in its wake, who had invested in Greek government bonds either because they trusted their country or because this was the way they were compensated for services provided or for products sold to companies and state entities.