Oct. 26 (Bloomberg) -- Greece needs to write down its debt by at least 60 percent and investors should get securities that offer a share in the country’s future economic growth, former Argentine Finance Minister Guillermo Nielsen said.
Investors need to accept bigger losses than those applied after Argentina’s $95 billion default in 2001 and subsequent devaluation, said Nielsen, who oversaw the restructuring of the South American nation’s debt in 2005.
“At 60 percent, you begin to have a workable solution,” Nielsen said in a telephone interview today. “The experience of Argentina was ignored by European leaders. The initial haircut can be very painful. One cannot imagine that things will improve when you’re in a crisis.”
European Union talks with banks on bondholder losses as part of a second Greek rescue package are deadlocked and have been suspended, an EU official said today. While policy makers and bankers are converging on a 50 percent writedown for Greece’s lenders, disagreement is centered on the specifics of the transaction.
Greece has about 360 billion euros ($498 billion) of debt, equivalent to five times the size of Argentina’s default a decade ago. After shrinking 10.9 percent in 2002, Argentina’s economy expanded for eight consecutive years, with growth exceeding 8 percent in every year aside from 2008 and 2009.
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