Private holders of Greek debt might need to accept losses of up to 60 percent on their investments if Greece’s debt mountain is to be made more sustainable in the long term, a downbeat analysis by the EU and IMF showed on Friday.
Eurozone finance ministers threw Greece a lifeline on Friday by agreeing to approve an 8 billion euro (US$11 billion) loan tranche that Athens needs next month to pay its bills.
However, the European Commission, European Central Bank (ECB) and the IMF — the so-called troika — issued a gloomy report on Greece’s ability to pay its debts.
Among three scenarios it examined, the only one that would reduce Greece’s debt pile to 110 percent of GDP — a level still regarded as high — was one in which private bond holders agreed to a 60 percent haircut.
“To reduce debt below 110 percent of GDP by 2020 would require a face value reduction of at least 60 percent and/or more concessional official sector financing terms,” the debt sustainability report, obtained by Reuters, showed.
A footnote explained that the ECB disagreed with including the scenarios in the report, concerned that private sector lenders would refuse to agree to such a steep writedown voluntarily, effectively leading to a fullscale Greek default.
The report also said Greece’s debt pile could peak at 186 percent of GDP, from around 160 percent currently.
The eurozone finance ministers said the 8 billion euro tranche, the sixth installment of 110 billion euros of EU/IMF loans agreed last year, would be paid in the first half of next month, pending the IMF’s sign-off. That should allow Greece to avoid defaulting on its debt this year.
Meeting ahead of a summit of EU leaders today, finance ministers also indicated that deep divisions between France and Germany over how best to scale up the eurozone’s bailout facility to give it more firepower might have been overcome.
France believes the most efficient leverage method would be to turn the European Financial Stability Facility (EFSF) into a bank, allowing it to access ECB liquidity. Germany and others opposed this, and France’s finance minister said he was not going to be unnecessarily confrontational over the issue.
“We will not make it a point for definitive confrontation,” he told reporters as he left the meeting late on Friday. “What matters is what will work. And what will work is something that is dissuasive and an effective firewall.”
Austria’s finance minister, Maria Fekter, who arrived at the meeting saying there were seven options on the table for leveraging the EFSF, left the meeting saying there were now two, indicating that some progress had been made.
If France does ultimately drop its insistence on the EFSF being turned into a bank, then the most likely method for scaling up the EFSF is expected to be some form of insurance program aimed at restoring confidence in eurozone debt.
A group of 10 major financial companies, including banks, insurers and global bond fund giant PIMCO, wrote to EFSF chief Klaus Regling on Friday saying partial insurance of sovereign bonds could be a viable means to secure private funding for eurozone states “if implemented in size.”
“The ability of the EFSF to potentially write significant amounts of such ‘insurance’ without any further increase to the existing commitments should be an important element in any comprehensive plan by the European government to address the crisis,” the letter said.
By guaranteeing only a portion, perhaps one-third or one-fifth, of each debt issue, the available EFSF funds could stretch three to five times further, increasing it to around 1 trillion euros.
However, analysts are concerned that such a plan could create a two-tier bond market, with bonds that have guarantees trading at a premium to the secondary market — an outcome that could exacerbate market turmoil. Some analysts believe choosing such an option would be the worst outcome of the summit.
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last