Greece warned Friday it might only go ahead with a debt swap plan that is a key part of its second bailout plan if at least 90 per cent of the private creditors who hold its bonds take part.
On July 21, European leaders agreed to a plan that would see banks, insurers and other financial institutions give Greece easier repayment terms on its bonds, a move expected to save the country 37 billion euros ($54 billion Cdn.).
In return, Greece must pay 43 billion euros ($60 billion) for a program that would provide collateral backing for the bonds out to 2020.
If the banks are unwilling the share the burden, it will be harder for richer eurozone governments to get voter support for the new aid plan
In a letter to foreign finance ministers, the government Friday said it "shall not be obliged to proceed" unless it could get at least 90 per cent of its eligible bonds swapped or rolled over. It also said 90 per cent of that must be bonds maturing between June 30, 2011, and Aug. 31, 2014.
"If these thresholds are not met, Greece shall not proceed with any portion of the transaction" if it determines — along with international partners such as the eurozone and International Monetary Fund — that the total contribution of the private sector is insufficient for the July 21 agreement to work, the letter said.
Greece had previously said 90 per cent was a target rather than a condition.
However, in recent weeks, speculation has mounted that it may fall well short of that target, perhaps enlisting only 50 per cent.
Amadeu Altafaj-Tardio, a spokesman for the European Commission, the EU's executive, said discussions with Greece's private creditors were "ongoing."
"We have no reason to think that the figure will be far from that (90 per cent) estimate," he said.
Greece has been relying on EU and IMF rescue loans from since last year to deal with its high debt servicing costs. In return it has promised to cut its deficit, aiming for a target of 7.5 per cent of gross domestic product this year from 10.5 per cent in 2010.
It has cut spending and raised taxes, but has struggled to meet its targets.
Greece's Finance Minister, Evangelos Venizelos, said Greece was in a "very difficult" situation.
"There is no doubt that the Greek economy is going through its most difficult time in many decades, the most difficult time in the last 37-40 years," he said in parliament.
Venizelos said the recession was deeper than initially predicted and the economy would contract by more than 4.5 per cent of gross domestic product — which would affect the country's targets.
Uncertainty over the ability of banks exposed to Greece and other debt-burdened European economies such as Ireland, Portugal, Spain and Italy to weather the crisis has weighed on the German stock market.
Its benchmark index, the DAX, has fallen 25 per cent this month, since bans on short selling in France, Spain, Italy and Belgium have made Germany the place of choice in which to hedge against losses in European stocks.
With files from The Associated Press Accessibility Links
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