IIF against a bigger haircut
Private creditors are reluctant to accept a bigger haircut to the Greek bonds they hold, the head of the Institute of International Finance (IIF), Charles Dallara told the Financial Times on Saturday.
Dallara, who represents the banks in negotiations with the European governments, said that imposing a greater loss on bondholders would lead investors to selling bonds of other eurozone members, too, jeopardizing the stability of the euro.
?We do not see any strong arguments in favor of opening the July 21 agreement. A deal is a deal,? Dallara stated.
Dallara adds that the July agreement for a 21 percent haircut can reduce the Greek debt considerably, from 155 percent of the country?s gross domestic product to just 97 percent in 2020.
He asks for some time in order for the agreement to bear fruit, alongside the Greek pledges for a primary surplus next year and privatizations to the tune of 50 billion euros (by 2015).
The Financial Times commented that other top bankers appear more conciliatory, which means that Dallara?s position could be down to negotiation tactics.
However, the outgoing chairman of the European Central Bank, Jean-Claude Trichet also voiced his opposition against a bigger haircut.
Speaking to the FT on Saturday he said that the ECB has been stretched to its limits and if Greece defaults it will be no longer in a position to accept Greek bonds.
In that case the eurozone governments will need to support the financial system so as to avert an economic catastrophe, he suggested.
