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20th January 2012

Plan proceeding for 70-75% writedown on Greek debt?

A Le Monde report suggests that the European Union authorities may have now agreed to take the so-called voluntary writedown of Greek sovereign debt to 70% or 75%. The ACP, the French banking regulator is said to be preparing instructions to be issued to the French banks. Presumably one reason for urgency is so the banks may account for the matter within the 2011 year. The regulator nor any of the major French banks would comment on the story.

If true much greater resistance may be expected from the banks compared with last year when a 50%-60% 'voluntary' writedown was agreed.
An issue for a number of the banks with significant Greek exposure is that they would be financially better off if an official default was declared due to Credit Default Swaps or other hedging in place which can only be called if an official default is declared.