Bloomberg News

Europe Debates Investor Pain in Greek Debt Swap, Urpilainen Says

October 05, 2011

Oct. 5 (Bloomberg) -- Euro area countries are discussing whether investors are taking on an “adequate” share of losses in Greece’s second bailout, according to Finland’s Finance Minister Jutta Urpilainen.

“Many euro countries have now realized that the July deal is too advantageous for investors and there’s too little investor burden sharing,” Urpilainen, 36, said at a press briefing in Helsinki today.

Euro area finance ministers debated ways to increase burden sharing at a meeting on Oct. 3, she said. “No solution’s been put forward so far,” she said.

Still, the debt swap agreed on July 21, in which investors would absorb a 21 percent loss in net present value terms, is a “step in the right direction,” Urpilainen said. Finland “emphasizes” the need for bondholders to share losses, she said.

Even without changing the terms of the debt swap agreed on in July, investors may be taking on a bigger share of Greece’s rescue costs as market conditions worsen, according to Charles Dallara, managing director of the Washington-based Institute of International Finance.

“The implied subsidy granted by the private creditors is much larger today, given that market rates are much higher,” Dallara said in a telephone interview yesterday.

--Editors: Tasneem Brogger, Jonas Bergman.

To contact the reporter on this story: Kati Pohjanpalo in Helsinki at kpohjanpalo@bloomberg.net

To contact the editor responsible for this story: Tasneem Brogger at tbrogger@bloomberg.net


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