Jurisdictional stumbling blocks for foreign investors anna mitsou draft 12. The purpose of the restructuring is to obtain from the states creditors a reduction of the debts principal or interest rate. Because of a lack of trust in greece s ability to repay its debt, two programs were organized that provided financial assistance to greece. The greek debt restructuring of 2012 stands out in the history of sovereign. Based on this analysis, three policy implications are formulated, with relevance to. Jun 05, 2015 the restructuring plan is ambitious, offering ways to reduce the amount of debt held by all four of its publicsector creditors. One of the reasons for this seems to be that the restructuring also affected greek banks, which held a significant amount of greek sovereign papers. Greece reaches breakthrough deal with creditors financial times. This article revisits greeces 2012 debt restructuring, focusing on the legal changes and litigation that arose in relation to it in order to shed light on what kind of restructuring we may see next, in both greece and the larger euro area. Greek debt restructuring and investment treaty arbitration. Apr 24, 2019 debt restructuring is a method used by companies to alter the terms of debt agreements in order to achieve some advantage with outstanding debt obligations.
In february 2012, the greek government launched an offer to exchange 206 billion of bonds held by private sector investors for new bonds with a face value of about 100 billion. Greeces new debt restructuring plan financial times. May 25, 2016 greece reaches breakthrough deal with creditors agreement on restructuring athens debt buys time to secure countrys financial future jeroen dijsselbloem. Lessons for the eurozone from the greek debt crisis forbes. Jun 05, 2015 for some reason, people think a sovereign default, and a subsequent debt restructuring such as greeces government faces, is something that is conceivable the proverbial asteroid hitting the.
The timing and design of the restructuring left money. Cac and sovereign debt restructuring in the euro area. The greek debt restructuring of 2012 stands out in the history of sovereign defaults. Because of a lack of trust in greeces ability to repay its debt, two programs were organized that provided financial assistance to greece.
The socalled worlds biggest debtrestructuring deal in history 14. We believe the combination of german bank meetings and lazards mandate is the precursor to a voluntary debt restructuring. The design of a sovereign debt restructuring mechanism for. In 2010, greece said it might default on its debt, threatening the viability of the eurozone itself. Mar 09, 2012 new york cnnmoney greece announced friday that its privatesector creditors will take part in a historic restructuring of the governments debt, setting the stage for the nation to secure. Greeces debt problem 3 introduction 3 the financial picture 4 who owns greeces debt. Greece reaches breakthrough deal with creditors agreement on restructuring athens debt buys time to secure countrys financial future jeroen dijsselbloem. In the event, greece sought to include all ggbs issued before 1 january 2012 and it also included a number of guaranteed bonds of stateowned enterprises whose debt was already serviced by greece and accounted for as greek debt. Prior sovereign debt restructurings provide considerable guidance for how such a restructuring might be shaped. In greece s debt restructuring of march 2012, these kinds of vote differentials had meant the difference between creditors receiving a 60% npv haircut and a 0% haircut zettelmeyer et al.
Pursuant to an exchange offer made on february 24, 2012, the greek government offered holders of greek bonds the option to exchange their bonds for. However, greece access to capital markets was all but blocked by the looming prospect of a debt restructuring. Key features of collective action clauses and the sovereign debt restructuring mechanism 14 2. Greece has succeeded in pushing through the biggest sovereign debt restructuring in history, with 85. Private creditors of the hellenic republic accepted an exchange offer which led to a haircut on their debt. Biggest debt restructuring in history buys greece only a. For some reason, people think a sovereign default, and a subsequent debt restructuring such as greeces government faces, is something that is conceivable. Aug 20, 2018 lessons for the eurozone from the greek debt crisis. New york cnnmoney greece announced friday that its privatesector creditors will take part in a historic restructuring of the governments debt, setting the stage for the nation to secure. It achieved very large debt reliefover 50 percent of 2012 gdpwith minimal financial disruption, using a combination of new legal techniques, exceptionally large cash incentives, and official sector pressure on key creditors.
A key component of greeces economic reform programme is a reduction in the countrys debttogdp ratio. Debt restructuring and economic prospects in greece greece has been at the epicenter of the european debt crisis. The purpose of the restructuring is to obtain from the states creditors a. If greece does the necessary reforms, it will be easy for it to find again growth and prosperity. Thus, in addition of official funds to satisfy the financing needs of the country, measures were required to reduce the debt burden. Lessons for the eurozone from the greek debt crisis. Contagion did not follow the greek debt restructuring of 2012 and that exercise was, by any measure, a savage debt restructuring. A euro area state hit by a major debt crisis has essentially two main options.
By the time of the second bailout and private sector debt restructuring in 2012, their exposures were minimal. Greek debt sustainability and official crisis lending. This paper outlines the elements of one possible plan b, a restructuring of greeces roughly 300 billion of government debt. Sovereign debt restructuring in europe buchheit 2018. Imf wont fund greek bailout until it gets more clarity on debt restructuring published thu, jun 15 2017 8. For some reason, people think a sovereign default, and a subsequent debt restructuring such as greeces government faces, is something that is conceivable the proverbial asteroid hitting. Large public deficits have been a defining characteristic of the greek social model since the reestablishment of democracy in greece in 1974. The greek debt crisis is the dangerous amount of sovereign debt greece owed the european union between 2008 and 2018. The greek governmentdebt crisis was the sovereign debt crisis faced by greece in the aftermath of the financial crisis of 200708. In light of this view, we are staying short the euro and deutsche bank.
Therefore, in exchanging its debt, greece will be able to reduce it by 30% or more. Debt restructuring is a method used by companies to alter the terms of debt agreements in order to achieve some advantage with outstanding debt obligations. Other recent restructurings include belize 2007, 20, jamaica 2010, 20. If one wants to be very cynical about this, you can even increase the debt of greece to say eur300bn, via one off restructuring charge of say eur30bn. Greece should ask a debt restructuring and erasing of at least 50% of its debt both from private lenders and from the eu lenders. It achieved very large debt relief over 50 per cent of 2012 gdp with minimal financial disruption, using a combination of new legal techniques, exceptionally large cash incentives, and official sector pressure on key creditors. In greeces case, these holdout creditors did not present a problem to an effective debt restructuring because the foreignlaw bonds constituted only a minority of debt outstanding. Behind the greek default and restructuring of 2012 arturo c. Its time for your default and debt restructuring june 5, 2015. In greeces debt restructuring of march 2012, these kinds of vote differentials had meant the difference between creditors receiving a 60% npv haircut and a 0% haircut zettelmeyer et al. An autopsy jeromin zettelmeyer, christoph trebesch, and mitu gulati abstract the greek debt restructuring of 2012 stands out in the history of sovereign defaults. Greeces debt crisis threatened to widen across europe, as bond. May 09, 2010 this paper outlines the elements of one possible plan b, a restructuring of greeces roughly 300 billion of government debt. Mar 10, 2017 the aim of any restructuring is to include as much of the debt as possible.
In the course of this development, sovereign debt sustainability gained recognition as the objective of international debt restructuring efforts. After the biggest debtrestructuring in history, in which securities totaling about 200 billion euros suffered losses, greeces tradeable debt is now just 67. Greek debt has been restructured repeatedly, and now twothirds of the stock contains. The aim of any restructuring is to include as much of the debt as possible. How should a greek debt restructuring be done and what are. Thus, sovereign debt restructurings are not an issue of concern only for the debtor state and its. Sovereign debt restructuringrecent developments and. The hellenic republic has recently completed the largest sovereign debt restructuring in history. Towards a legal framework on sovereign debt restructuring.
May 04, 2010 we believe the combination of german bank meetings and lazards mandate is the precursor to a voluntary debt restructuring. It achieved very large debt relief over 50 percent of 2012 gdpwith minimal financial disruption, using a combination of new legal techniques, excep. Greek domestic bonds were exchanged for new bonds with lower principal, lower interest rates and longer maturity. The restructuring plan is ambitious, offering ways to reduce the amount of debt held by all four of its publicsector creditors. An incremental approach to sovereign debt restructuring. Overview, policy responses, and implications congressional research service 2 eurozone members. The greek debt restructuring and property rights a greek. Understanding the political economy of the eurozone crisis. After this part of the debt is erased, greece will finally have a manageable debt level, approximately 80% of its gnp. But it is strikingand extremely unusualthat the creditors have not granted the debtor countries with the exception of greece and cyprus any signi. It achieved very large debt relief over 50% of 2012 gdp with minimal financial disruption, using a combination of new legal techniques, exceptionally large cash incentives, and official sector pressure on key creditors. To avoid default, the eu loaned greece enough to continue making payments. In 2016 greece made a significant economic adjustment, which was a result of extensive fiscal consolidation and implementation of reforms.
1002 1075 283 1326 1619 3 839 1071 1351 1543 514 1542 1510 317 1184 1448 979 1 242 576 679 13 259 1311 727 1328 741 249 314 935 353 1284 1442 954 1325 1346 662 1109 97 670 667 128 881 1433