ATHENS — Greece’s cabinet Friday approved details of a €100 billion ($134 billion) debt write-down for the country that is part of a fresh multi-billion euro rescue plan that Athens is seeking from international creditors.
After meeting for a little over one hour, cabinet ministers signed off on the deal, which includes a controversial measure to strong-arm investors into the restructuring, just a day after parliament voted on implementing the legislation.
Earlier this week, eurozone finance ministers approved a fresh €130 billion bailout for Greece and the debt-restructuring program. The two deals are linked — Greece’s European partners demanded that the country proceed with a debt restructuring before they would approve the new loan.
To secure that loan, Greek lawmakers are also scrambling to pass further cutbacks by the middle of next week to meet the demands of the bailout.
“The cabinet has approved the procedure, the terms, and offer relating to the [debt deal],” a senior government official present in the meeting said.
Specifically, the legislation retrofits outstanding Greek bonds with so-called collective-action clauses (CACs), aimed at forcing losses on bondholders who may resist what is being billed as a “voluntary” debt restructuring.
Under the terms of the debt deal, Greece’s private-sector creditors will waive 53.5 percent of the principal on the bonds they hold by swapping their old bonds with new ones, worth less than half the face value of the original bonds and carrying lower coupons. The deal aims to erase as much as €107 billion from Greece’s sovereign debt burden and bring its debt ratio down to a more sustainable 120.5 percent of GDP by 2020 from more than 165 percent now.
The Greek government hopes for a minimum participation of at least two-thirds of bondholders in the planned debt exchange, but some say the participation rate may reach 85 percent or more.
The public offer for the debt swap will be formally launched later Friday and will run for two weeks. By March 9, according to a government official, Greece will determine whether the take-up rate from investors is enough for the debt deal to proceed. If so, the actual exchange of the new bonds for the old will take place March 12.
Depending on the participation rate, Greece will then decide whether to activate the CACs to rope in any holdouts — a move that risks triggering default insurance contracts on Greek government bonds.