Greece Approves Deal to Wipe Out $142 Billion in Debt

ATHENS – Even as Greek banks chase are set to be bailed out with $47 billion in government funds as part of a second rescue deal with international lenders to save the country from bankruptcy, the Greek Parliament has approved a deal that would let the country eliminate $142 billion in debt, although new projections show the economy will shrink more than 4.4 percent, the worse in Europe. While Greek workers hit by two years of pay cuts, tax hikes, slashed pensions and the coming layoffs of 150,000 workers continued to protest, the debt write down was passed by a show of hands in a near-empty Parliament with no roll call vote.
That paved the way for Greece to launch a forma offering to private bondholders who will either have to accept a 74 percent loss or be forced to do so. Meanwhile, Greek banks who are being rescued continue to press consumers, including those who’ve lost their jobs in a depression of near 21 percent unemployment, to pay back loans at their full value or be taken to court.
The debt write-down was imposed on banks, pension funds and other holders of Greek bonds as part of a deal the country worked out with the Eurozone of the other 16 countries using the euro as a currency to keep Greece from defaulting, be able to pay back an $18 billion loan installment in March and keep paying workers and pensioners. Finance Minister Evangelos Venizelos, one of the holdover ministers from the former ruling PASOK Socialists now serving in a hybrid government with their bitter rival New Democracy conservatives under interim Prime Minister Lucas Papademos, said he hopes the arrangement can be completed by the end of March, which means Greece could miss the payment deadline he always insisted was essential to meet or the country would collapse.
Speaking in Parliament ahead of the vote, Venizelos insisted that ratifying the bond swap was the only way forward, and the alternative would be catastrophic, setting Greece back decades.“The true dilemma is: either sacrifices with prospects, or complete destruction with no prospects. Either cuts, which are harsh … or the inability to pay salaries and pensions. Either reduction of fortunes, or a complete loss of fortunes. Either high unemployment or generalized unemployment,” he told lawmakers, although there is no evidence that people with fortunes have been affected. Greece is surviving on an ongoing series of $152 billion in rescue loans and a just-completed second bailout of $175 billion from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) who demanded more austerity measures in return, including cutting the minimum wage up to 32 percent and eliminating collective bargaining rights for workers.
Venizelos, who has doubled income and property taxes and stands to be his party’s candidate in the next elections, slated for April, said, “Now Greece is obtaining a window of opportunity. We must make the most of it. We have not finished. We are starting again with better terms. We mustn’t repeat mistakes, we mustn’t have delays …. We must complete the implementation of the program.”
The bill passed includes collective action clauses that, if activated, will allow a majority of bondholders favoring the swap to impose their decision on holdouts, although the ratings agency Fitch’s warned that could trigger an automatic default. “If we do not implement that legislation, every speculator will be able to keep out of the process in the expectation of being paid in full,” Venizelos said.
Parliament is also due to vote next week on further harsh austerity measures in 2012 worth $4.2 billion. These will include reductions to already depleted pensions, and deep cuts in health, education and defense spending. Pantelis Kapsis, the government spokesman, warned that Greece faces further tough decisions in June, when debate will start on cutbacks for 2013-14, which have already been agreed upon with creditors.