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IIF chief confident bank participation in Greek 'haircut' to be high

30 october 2011, 17:11
Charles Dallara, managing director of the Institute of International Finance. ©Reuters
Charles Dallara, managing director of the Institute of International Finance. ©Reuters
Bank participation in voluntary write-downs of Greek debt will be "very high", AFP reports, citing Charles Dallara, the head of the International Finance Institute (IIF) on Saturday.

"I think it is too early to say (the exact percentage) and we have not determined exactly all the terms and conditions for the exchange. However, I am certain the participation will be very high," Dallaras said in an interview to Ethnos newspaper.

The banks and European Union officials battled in a summit in Brussels over the size of the "haircut", or write-down they would take on Greek debt they hold, in order to boost the sustainability of Athens' finances.

After a marathon summit that ended in the early hours of Thursday, banks agreed to take a 50-percent cut in their Greek bond holdings in order to reduce the more than 350 billion-euro (495 billion-dollar) Greek debt.

The managing director of the Washington-based global association of financial institutions described the decision as "historic".

"This is a historic agreement and I am very encouraged. I believe it creates a historic chance for Greece," Dallaras told Ethnos newspaper.

However, a great percentage of Greeks find negative the broad-based eurozone debt crisis accord believing it will translate into more sacrifices and austerity measures without guaranteed results.

A Kapa Research opinion poll for To Vima newspaper shows that 44 percent of those surveyed find the summit's decisions negative, while only 12.6 percent as positive.

The telephone survey was carried out on 1,009 people across Greece.

Greek debt at 350 billion euros is equal to about 160 percent of Gross Domestic Product but the 50-percent reduction agreed in Brussels only covers those government bonds held by private sector creditors such as banks.

The result is the total debt mountain should be cut to about 120 percent of GDP by 2020, much more manageable but still well above the 60 percent EU limit.

To protect the banks from the fallout of the debt reduction, the EU also agreed to make available some 30 billion euros to help recapitalise them and a new 100 billion-euro lifeline for the country, after the 110 billion-euro loan already disbursed in 2010.

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