Bloomberg News

Pictet’s Zweifel Sees 50%-60% Haircut in ‘Orderly’ Greek Default

October 04, 2011

Oct. 4 (Bloomberg) -- Greece may impose a loss of between 50 percent and 60 percent on investors as European policy makers seek to prevent a potential default from infecting other economies, according to the chief economist at Pictet Asset Management.

“Greece is bankrupt,” Patrick Zweifel, who helps oversee $125 billion, said in an interview in London today. “The country will need roughly 10 years to get out of their debt. History shows we cannot have an orderly default but it is possible to have one if contagion is avoided.”

The Stoxx 600 Europe Index plunged 17 percent in the three months through September, the worst quarter since 2008, on concern that the region’s debt crisis is careening out of control. European governments today dropped clues that bondholders may be saddled with bigger losses on Greek debt, intensifying market jitters that a second aid package designed to quell the fiscal crisis might unravel.

Finance ministers considered reshaping a July deal on Greek bonds that foresaw investors contributing 50 billion euros ($66 billion) to a 159 billion-euro rescue. That private sector involvement, or PSI, includes debt exchanges and rollovers, targeting bondholder losses of 21 percent.

Policy makers “just can’t postpone decisions anymore,” Zurich-based Zweifel said. “The European Central Bank must make sure there is no contagion” through a program of bond purchases, while the European Financial Stability Facility “will make sure the banks are capitalized.”

--With assistance from James G. Neuger and Jonathan Stearns in Luxembourg. Editors: James Hertling, Alan Crawford

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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