Greek bondholders are set to accept higher losses as the contentious negotiations over a writedown of Athens’ debt burden come to a head in the next week, according to the Financial Times.
People involved with the discussions about so-called private sector involvement, or PSI, said that bondholders were likely to suffer a haircut of 55-60 per cent, more than the 50 per cent originally agreed in October.
Both the IMF and Greece have argued that October’s deal should not only be maintained, but also toughened, while bondholders and elements of the European Central Bank have proposed watering down or even scrapping the idea.
Opponents of the scheme argue that it has come to be seen as a central cause of contagion in the eurozone crisis, with investors arguing that the precedent set by PSI, albeit conducted on a “voluntary” basis, has spooked the markets to such a degree that there is now a widespread fear that the structure could be replicated in countries such as Italy.
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