By SETimes

The terms of a bond swap included in Greece's newest bailout plan might be extended to cover government debt maturing after 2020, Finance Minister Evangelos Venizelos said.

According to the Greek daily Kathimerini, Athens is considering extending the target date agreed to with leaders of the other Eurozone countries last month by up to four years, to 2024.

Noting that the details of the offer will be finalised by the end of September, Venizelos explained that the idea behind that move is to encourage greater private sector participation in the deal.

"Our aim is to have 90% participation for this, or 135 billion euros," Reuters quoted him as saying in an interview with Greek radio station Real FM on Wednesday. "We need to identify bonds worth 150 billion euros maturing by 2020, or a bit later than 2020, in order for this amount ... to be gathered."

His statement came less than three weeks after the leaders of the Eurozone agreed on a new 109 billion-euro bailout for Greece to help it avoid defaulting on its huge sovereign debt, currently standing at about 350 billion euros.

The agreement was reached during an emergency meeting in Brussels on July 21st, roughly 14 months after Greek Prime Minister George Papandreou signed a deal on a three-year rescue package worth 110 billion euros with the EU and the IMF.

The purpose of the planned swap is for private investors, such as banks, pension funds and insurance companies, to voluntarily trade their Greek government bonds for new ones with longer maturity periods, lower interest rates or lower face value.

Banks estimate the losses they will suffer from the exchange at about 21%.

France, Germany and the UK are the three countries with largest exposure to Greek sovereign debt.

Germany's second-largest bank, Commerzbank AG, is also among those affected by the swap deal. It said on Wednesday that its net tax profit for the second quarter of this year fell 93% from that for the same period in 2010 as it wrote down about 25% of the value of Greek government bonds in its portfolio, which amounted to 760m euros.

France's Societe Generale bank, which has agreed to participate in the second bailout plan for the debt-laden Balkan country, is said to hold 2.9 billion euros in Greek government bonds. Its total exposure, however, has been assessed at 6.59 billion euros. Reports on Wednesday said the bank has taken a pretax write-down of 395m euros for its participation in the second rescue package for Greece, which is well below the 534m euros set aside by Paris-based BNP Paribas SA for costs related to the bailout.

Meanwhile, the Wall Street Journal quoted an unidentified senior Eurozone official as saying that the total pledges by banks under the swap deal fell far below expectations, as they totalled "around 65 billion euros".

"The participation by the private sector is poor so far, so it could be stretched with bonds maturing in 2022 or even 2024," the official said.

Some market participants warned that the proposed extension could hit French banks that are heavily exposed to Greek debt.

- Provided by Southeast European Times

 

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