Monday, 5 March 2012

by Dina Kyriakidou

ATHENS, March 5 (Reuters) - Greek Finance Minister Evangelos Venizelos warned Athens' private creditors on Monday not to hold out but take the bond swap on which a second bailout of the debt-ridden country depends because it was the best deal they would get.

Venizelos told Reuters in an interview three days before the exchange offer expires, that the terms hammered out last month after months of tortuous negotiations were favourable and Greece would not hesitate to activate laws forcing losses on bond holders who did not willingly sign up.

"Whoever thinks that they will hold out and be paid in full, is mistaken," he said. "We are ready to activate CACs (collective action clause to enforce losses) if needed," he said.

The deal clinched by euro zone finance ministers in the early hours of Feb. 21 involves investors taking a nominal 53.5 percent loss, which equates to a real 73-74 percent loss, on their Greek bonds in a deal aimed at rescuing Greece from a chaotic default by cutting its debt mountain by around 100 billion euros.

Venizelos said he was optimistic participation would be over 90 percent, with investors lured by the sweeteners offered - a cash equivalent upfront payment, a new bond issued under English law, a GDP warrant offering higher interest if the Greek economy does better than expected and equal treatment for the new bonds with the public sector.

"Our target is near universal participation," he said. "No one should imagine that there will be a second offer that will include these elements."

Venizelos said participation was impossible to gauge right now but investors should be putting in their responses by Wednesday.

Greece has said it wants 90 percent take up. If it falls below that but exceeds 75 percent, it will consult with its EU and IMF partners on how to fill the gap, with or without activating CACs. Below that level, the deal would be off, potentially plunging the euro zone back into crisis.

A group of the biggest holders of Greek government debt said on Monday they would take part. Twelve banks, insurers, asset managers and hedge funds in the steering committee of bank lobby group IIF, which helped negotiation the bond swap deal, said in a statement they would take part in the exchange.

They include BNP Paribas, Deutsche Bank, National Bank of Greece, Allianz and Greylock Capital Management.


Venizelos, a front runner for taking the socialist party leadership at a March 18 party ballot, said Greece was committed to its obligations under a second, 130 billion euro bailout which demands tough austerity measures and reforms.

Snap elections expected this spring would not derail those efforts as the main parties in the emergency coalition government of technocrat Lucas Papademos had offered written commitments and would honour them, he said.

His PASOK party and the conservative New Democracy, which is pushing for snap elections no later than April 29, have sent letters to EU partners assuring them Greece would stick to its pledges.

"Signatures are signatures. Commitments are commitments," Venizelos said.

He would not say when he would declare his candidacy for the PASOK leadership but opinion polls show he is the most popular pick within his party and the second favourite to be the next prime minister after New Democracy leader Antonis Samaras.

Venizelos confirmed the Greek economic slump, the worst in decades, would continue for a fifth year in 2012 and GDP would start to grow only in 2013.

A constitutional law professor who took the helm of the finance ministry in June after nearly two years of unsuccessful socialist policies to tackle Greece's debt mountain, Venizelos said he was confident Greeks were determined to stay in the euro and have a European future.

"Elections are not a problem," he said. "People will choose how they will be governed but the country will be governed with respect to the commitments it has made to its partners."

Tags: Interviews