Greece’s next aid package may include incentives for bondholders to roll over maturing debt without triggering a credit-rating downgrade that would roil Europe’s banking system, two people with knowledge of the talks said.
Investors may be offered preferred status, higher coupon payments or collateral as inducements to buy bonds replacing Greek debt maturing between 2012 and 2014, said the people, who declined to be identified because the talks are in progress.
The sweeteners would be part of a revised aid package, to be decided by the end of June, amounting to a voluntary extension of Greece’s debt maturities that aims to skirt the technical definition of default, the people said.
European officials are trying to prevent the euro region’s first sovereign default as investors dump Greek bonds on concern the government in Athens won’t be able to meet its bond obligations. Greece’s financing needs beyond last year’s 110 billion-euro ($159 billion) package may be known tonight or tomorrow, as European and International Monetary Fund officials complete work on an assessment of Greece’s economy.
Senior aides to European finance ministers are discussing elements of the package in Vienna today. The ministers themselves may meet as early as next week, with final decisions due at a summit of government leaders on June 23-24.
So-called negative incentives are also under consideration, such as cutting off old Greek bonds from eligibility for use as collateral with the European Central Bank, the people said.
Policymakers are also looking at other ways of encouraging bondholders to maintain exposure to Greece, along the lines of the 2009 “Vienna Initiative” that leaned on creditors to roll over expiring bonds, the people said.
Bloomberg
