Deceit of the Successful PSI
By Peter Koutroubis at May 31, 2012
By Dimitris Kazakis,
Newspaper “To xoni” (The Funnel), 27.05.2012
Three important conditions (according to market criteria), which do not apply, prove why the debt reduction is nothing but a big... lie
I imagine you have heard of the so called Greek debt write-down of 106 billion Euros, thanks to the most …successful PSI of all times! This is how the real culprits of the biggest deceit against an entire nation celebrate, using the mask of ‘debt re-structuring’. Of course, there is nothing successful about the PSI. Three conditions would need to apply, if the PSI were to be successful:
1) Markets, especially secondary markets, should welcome the new bonds, issued to replace the old ones, with reasonable interest rates. Did this happen? No. Interest rates in the secondary market went down, but they still remain at record high, above 20%.This means that the markets see the new bonds’ issuing, as being in a state of default.
2) It should allow the country to quickly re-enter capital markets, as it happened in Uruguay in 2003, when the country re-entered the markets in 2-3 months, which is why its debt-restructuring was considered successful. Greece, is officially estimated to re-enter the markets after 2020. Though many analysts believe a more prudent estimate would be 2040. Imagine, what if the PSI was ..not successful!
3) It should bring a substantial, real reduction of debt in Greece. Not only this did not happen, but the very fact that Greece resorted to a new loan, much bigger than the seeming debt reduction, proves that no one can talk seriously about a successful PSI.
What is annoying in this matter, is that no political power is willing to challenge this myth of the PSI and its 106 billion Euro debt reduction. Everyone has believed it, taken it for granted and repeated it like a parrot. Until today, they all had an excuse: They did not know the exact data, so they just rested on what Mr. Venizelos told them. Even if this excuse is rather ridiculous (if one knows that the country was made to borrow another 137 billion from the European Financial Stability Facility and the IMF, in order to pay a PSI, to reduce the debt by 106 billion), well, for the sake of the argument, let’s accept it. This is because the government did not dare to present any official data about the PSI account before elections. You may ask: Did anyone ask for it? None of the other political forces asked, but even so, the government ought to have published a detailed account before taking the country to the national elections of the 6th of May and the 17th of June. The reason is simple. Not only to accurately evaluate the cost and gain from the PSI, but to judge the usefulness of the new loan and the new bailout deal.
The official PSI account would open the new bail-out topic, which was intended, in its totality, to cover up for the loose ends of the re-structuring. And none of the aspirants of political power wished to touch on this matter. The pro-memorandum, as well as the anti-memorandum forces, limited their debate exclusively around the Memorandum policies. See how easily Syriza’s leadership, while rejecting the Memorandum, accepts, even as a base for a conversation, the new bail-out and its convention.
The truth (hidden by the ‘parrots’), as presented by official data as, the official data of the sovereign debt gradually emerges after the PSI, the picture becomes bleak and pessimistic. According to the official Report on Sovereign Debt of March 2012 (no. 65) which was published this week by the Ministry of Finance, we have the following: On March the 31st, 2012 the sovereign debt of Central Administration was 280.29 billion euros (from 367.98 billion on 31/12/2011). In other words, just after the PSI termination, the name value of sovereign debt looks reduced by 87.69 billion euros. Where are the 106 billion debt reduction, which everyone parrots about, with Mr. Venizelos first and foremost? In the report, it says: “Within the framework of the Greek debt exchange during the first phase of the PSI implementation, on 12/03/2012, a debt of total name value of 177.3 billion euros was written down and new bonds were issued of total name value 55.8 billion euros and duration 11 to 30 years..” This means that, out of the totality of sovereign debt of 368 billion euros, the part included in the haircut was 177.3 billion - i.e 48% of sovereign debt - not 200 billion that they were telling us initially. On the Report’s tables, it says that loans from the Support Mechanism increased from 73.21 billion Euros on 31/12/2011 to 111.94 billion Euros on 31/3/2012. This is an emergency funding of 38.7 billion euros covering current needs of sovereign debt refunding up to the PSI. From this funding, 31.2 billion was bonds from the EFSF during the first implementation phase of the PSI, meaning financial returns asked by the bankers of Dallara’s lobby. Another 5.9 billion were received by the EFSF in order to pay back the interest rates recognized by the Greek government on ‘haircut’ bonds owned by local and foreign bankers. Another 1.64 billion was given by the IMF. In other words, out of the 106 billion foreseen by the new bailout deal, the government had received by 31/3/2012, 35% of the total.