ATHENS – A deal for Greece to reduce its debt by $134 billion by imposing big losses on those holding the country’s bonds may have helped keep the economy upright for now, but has devastated small investors, Democratic Alliance chief Dora Bakoyanni said, and she blamed the hybrid government of PASOK Socialists, and the Conservative New Democracy party in which she had previously served as a minister before being kicked out for refusing to support austerity measures in return for international rescue loans.
“We cannot betray the people who put their trust in us and purchased Greek bonds,” Bakoyanni said in Parliament, accusing the government of “making a mockery of small bondholders.”About 11,000 thousand people saw a big chunk of their investments go up in smoke in a debt restructuring Private Sector Involvement (PSI) deal the Troika of the European Union-International Monetary Fund-European Central Bank said was a condition of getting a second bailout, this one for $172 billion. Greece is surviving on a first round of $152 billion in emergency loans.
The deal was negotiated by interim Prime Minister Lucas Papademos, a former ECB Vice-President, and Finance Minister Evangelos Venizelos, who is set to step down on March 18 and take over PASOK from former Prime Minister George Papandreou, whose two-year reign ended four months ago when he resigned in the face of incessant protests, riots and strikes against the pay cuts, tax hikes, slashed pensions and planned firing of 150,000 workers he pushed on Greeks. An election to select a new Premier and Parliament will be held sometime in April or May, but both Venizelos and New Democracy leader Antonis Samaras support austerity measures, although Samaras said he may try to renegotiate some of the terms.
Bakoyianni’s assault came as New Democracy, which is leading in the polls but has barely 30 percent of the vote, and PASOK, which has fallen to under 13 percent from the 44 percent it enjoyed after winning in 2009, are trying to fend off challenges from new anti-bailout parties that have arisen. Some were formed by former PASOK and New Democracy Members of Parliament tossed out for refusing to obey the orders of party leaders to support austerity.
While Papademos and Venizelos hailed the debt deal that will put losses of 74 percent on investors and not see them paid back for up to 30 years, she said Venizelos reneged on promises to protect small investors. After he said he couldn’t, he has now praised their “patriotism” for taking big hits, and said they would be compensated one day.
Greece needed enough voluntary participation in the PSI to require all investors to take losses, but when some balked he invoked so-called Collective Action Clauses (CAC’s) forcing them to accept the terms anyway, and he included the small bondholders, those holding bonds up to 100,000 euros ($131,717) he said would be protected before he changed his mind.
Deputy Finance Minister Filippos Sachinidis said there’s nothing the government can do for now for the small investors, some of whom said they were purchasing shaky Greek bonds to show support for Greece, including those in the Diaspora. “We all know what must be done, but we all know what the decisions of the Eurogroup are,” he said in reference to the euro area finance ministers. “No one can ignore them,” he said.
The head of the Eurogroup, Jean-Claude Juncker, earlier this week said that Greek small bondholders will not receive any extra compensation beyond the offer being made to all investors. Juncker said he didn’t want a precedent set as some bondholders who refused to voluntarily accept the PSI deal are planning to sue to recover their losses.
The amount involved is around 2.3 billion euros ($3.02 billion), or less than 1 percent of the total debt involved in the so-called “haircut,” a miniscule amount for the government but not for the investors. Under the deal, an individual who invested $134,717 takes an immediate loss of $71,101 and won’t get the balance of $63,616 before 2041, if they are still alive.