Bloomberg News

IMF Says Debt Swap Agreement Is Between Greece and Creditors

January 12, 2012

(Adds details of EU deal in third paragraph.)

Jan. 12 (Bloomberg) -- Greece and its creditors will have to come to an agreement on a debt swap involving private sector lenders taking a 50 percent nominal loss on holdings of Greek debt, an International Monetary Fund spokesman said.

“It’s an issue between Greece and its creditors,” Gerry Rice, an IMF spokesman, said at a briefing in Washington today. “Once they come to a formal agreement, the fund will evaluate whether it’s consistent with debt sustainability targets.”

The deal, hammered out by European Union leaders, Greek officials and the nation’s creditors on Oct. 27, called for bondholders to accept a 50 percent cut in the face value of their Greek debt, with a goal of reducing the country’s borrowings to 120 percent of gross domestic product by 2020.

Creditors and authorities still need to agree on the coupon and maturity of the new bonds to determine the total losses investors would suffer. Failure to complete the voluntary swap threatens to further undermine confidence in the EU’s crisis leadership and deter investors from buying Europe’s debt.

An IMF mission will begin on Jan. 17 in Greece to discuss recent economic developments and the adjustment program, Rice said. “Once they come to a formal agreement the fund will evaluate whether it’s consistent with debt sustainability targets,” he said, adding that the IMF has attended some of the debt swap meetings as an observer.

The IMF’s Managing Director Christine Lagarde and Hungary’s envoy Tamas Fellegi will hold informal discussions in Washington today, the IMF said.

“These are not negotiating discussions, this is not a negotiation for the program, it’s an informal discussion,” Rice told reporters.

He also said an IMF monitoring mission to Italy would take place later this month “or very soon thereafter.”

An IMF team will start a visit in Egypt next week, Rice said, to initiate “discussions on possible IMF support.”

--With assistance from Rebecca Christie in Brussels. Editors: Gail DeGeorge, Paul Badertscher

To contact the reporters on this story: Meera Louis in Washington at mlouis1@bloomberg.net Sandrine Rastello in Washington at srastello@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net


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