Greek officials said on Dec. 12 they need an additional 1.29 billion euros ($1.68 billion) to finish a plan to buy back 30 billion euros ($31.9 billion) because the government had to offer a higher than expected price to lure enough investors to participate.
The deal was critical for Greece to get a delayed series of $56.7 billion in continued rescue monies from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) and reduce the country’s debt load.
Greek officials said the plan was a success, even though the higher prices meant the country narrowly missed meeting the target set by the Troika, even though the face value of the bond being bought back was 31.9 billion euros ($41.58 billion.)
Greece got the bonds back at a discount, paying only about 33.8 percent of their value, still higher than anticipated. “It is a good outcome, despite the need to increase the funding,” Theodore Krintas, head of wealth management at Attica Bank, told Reuters. “The bottom line is that it reduces debt,” he said.
IMF director Christine Lagarde said she was satisfied. “I can only welcome the results that have been produced by the debt buyback,” she said. She and Eurozone finance ministers will discuss the results in a meeting in Brussels on Dec. 14 where they are expected to release the postponed loans.
A Eurozone official told Reuters that the buyback left a 450 million euro ($586.73 million) hole in their plan to cut the Greece’s debt to 124 percent of GDP by 2020 but that wasn’t expected to hold up the coming loans, although the results could mean the ratio would be 128 percent in eight years.
Greece had to extend a Dec. 7 deadline to complete the deal after participation fell short but was successful only because the country’s struggling banks agreed to sell back whatever was needed although they will take about two billion euros ($2.6 billion) in losses. The government said it would hold them harmless against any prospective lawsuits from shareholders. Greek banks are in talks with the Finance Ministry to recoup some of the losses through deferred taxation, National Bank Chief George Provopoulos said.
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