Greece pushes for bigger debt haircut

Reuters reported Friday that Greece has opened direct negotiations with its private lenders by demanding they take a much larger haircut than the banks have offered.

The negotiations have focused on a measure used by debt markets to express the worth of future bond interest payments in current terms, called net present value or NPV.

Reuters quoted an anonymous source as saying Greece wants the NPV of what it owes to its private lenders reduced to 25 per cent, as opposed to the 40 per cent the banks want.

The negotiations are aimed at coming up with an agreement which would swap existing bonds — which Greece clearly can’t honour in its present fiscal state — with new ones worth much less.

Reducing Europe’s pile of debt is critical to saving the euro currency union.

But the spending cuts required to get bailout money from the European Union and the International Monetary Fund in the meantime have made strikes and protests a near daily occurrence in Greece.

The Reuters report also said Greece is now talking to its creditors directly.

It had been holding talks with Charles Dallara, the lead negotiator with the bank lobby group, the Institute of International Finance (IIF).

There are increasing doubts that Dallara has enough support to reach a deal, the report said.

The complex negotiations on writing down Greece’s $ 286 billion in private debt — that held by banks, pensions and hedge funds — are aimed at cutting the country’s debt ratio to 120 per cent of its Gross Domestic Product by 2020.

European Union leaders want a voluntary deal in order to avoid roiling financial markets.