New consultations on the haircut

The members of the Paris Club are meeting today in Paris with the participation of Charles Dallara and representatives of banks/creditors of the Greek state. The matter of the interest rate for new bonds to be issued under the PSI and upon which both the losses of the creditors and the benefit of the Greek state from the haircut will depend, remains open.

The meeting will include representatives of Greek banks as well. A major issue for banks remains that of the voucher, given the persistence of the IMF and EU, and Germany's most of all, that the weighted average rate be less than 4%. The partners are pressuring bankers to accept a rate between 3.5% - 3.8%, which raises the losses of banks to rates of 70% or more.

From Brussels where he was yesterday afternoon, Charles Dallara urged all parties to honor the October agreement. He acknowledged that the level of new coupon bonds remains an important issue and another obstacle is also the legal issue. He also said that "our position in negotiations on the Greek debt is clear. We want an orderly management of the state of the Greek debt." He called on all parties to realise the stakes and work towards a solution. According to Dallara, both sides should cooperate on the basis of the October 26 agreement, and take very seriously into consideration the fact that Greece has made considerable progress in adapting.

Speaking about the PSI, EU economy commissioner Olli Rehn said it might be possible to trigger the collective action clauses (CACs), although "Greece and the IIF are close to agreement on the PSI +," which according to Rehn should preferably be achieved in January instead of mid-February as announced yesterday by the Greek Finance ministry.

Christine Lagarde also called upon the private sector creditors to cooperate with the Greek government so that the negotiations on debt restructuring can be completed soon, while stressing that the Greek default is not an option. She noted that now, Greece will have to return to at least a mid-term sustainability and also called on European
governments, Germany in particular, to proceed with the strengthening of the European rescue funds. She also noted that she understands the reluctance of Germany to promote eurobonds but she expects that in the end the German government will listen to the IMF recommendations.