ATHENS: A voluntary swap of privately held Greek bonds as part of the debt-laden country's bailout will be successful and help it return to bond markets by early 2014 at the latest, a key official said on Saturday.
"I see no reason why it (Greece) should not return to markets in 18-30 months," said Charles Dallara, managing director of the Institute of International Finance (IIF), a global bank association, in an interview with Greek newspaper Kathimerini.
Greece's private sector creditors will take a 21 percent loss on their bond holdings as part of a 37 billion euro contribution to a rescue plan for the debt-stricken country, agreed at a euro zone summit earlier this month.
Under the plan, banks and insurance companies are invited to voluntarily swap their Greek government bonds for longer maturity paper at lower interest rates.
Bank lobby IIF, which is helping coordinate talks on the bond exchange which started in Athens this week, has estimated that about 90 percent of all private holders of Greek debt maturing by 2020 will take part in the scheme.
"I am certain that the (90 percent) target can be achieved, if everyone does their work and cooperates harmoniously," Dallara told Kathimerini.
Dallara dismissed analysts' concerns that Greece's latest bailout package offers respite but will ultimately fail to make the country's debt sustainable.
"I disagree," he said. "In my view, this is a very strong package for debt sustainability."
Dallara also predicted that Greek banks, the biggest holders of the country's debt, will not have to be nationalised or bought out by rivals to cope with losses they would incur under the bond swap.
"In our view, and based on the results of stress tests, most Greek banks can manage the losses resulting from this agreement without a need for large capital increases," Dallara said.
Copyright Reuters, 2011
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