Greece's finance minister has said the country's debt mountain, which threatened to sink the country and the euro zone, is now manageable after a deal with creditor banks to cut it by 50%.
Evangelos Venizelos said today that the deal would make Greece's debt "viable under international guidelines". He noted that, without the debt 'haircut', Greece would have seen its borrowing equal to 173% of annual economic output by 2020, an unsustainable level.
The minister said that negotiations now needed to take place with banks to determine their participation in the bond swap to slash Greece's debt mountain.
The head of Greece's public debt agency, Petros Christodoulou, said the talks would last two to three weeks. One possibility, he said, was for bondholders to receive 30% of their remaining investment in cash, and the remainder in bonds.
Meanwhile, the International Swaps and Derivatives Association said today that the 50% 'haircut' on Greek debt agreed with banks should not trigger payments under Credit Default Swaps contracts.
"Based on what we know it appears from preliminary news reports that the bond restructuring is voluntary and not binding on all bondholders," the New York-based ISDA said in a statement on its website.
"As such, it does not appear to be likely that the restructuring will trigger payments under existing CDS contracts," it said.
Euro zone leaders earlier agreed a deal to tackle the region's debt crisis, including an agreement with the Institute of International Finance banking lobby to force private investors to take a 50% loss on Greece's debt.
A CDS serves as an insurance against the risk of default by a company or a government and comes into force when a credit event - showing the underlying security to be no longer viable - is declared.
Allowing Greece in Euro an error - Sarkozy
It was a mistake to let Greece join the euro single currency when it did because its economy was not ready to form a monetary union with others in the club, French President Nicolas Sarkozy said this evening.
"It was an error," Mr Sarkozy said, when asked during a TV interview about having Greece adopt the euro two years after the single currency was created.
"Its economy was not ready."
Mr Sarkozy gave a rare televised interview to explain the plan agreed in Brussels, six months before a presidential election.
He likened Greece's sovereign debt crisis to the crisis at Lehman Brothers, and said that a failure to come up with a way to help Greece would have thrown the euro zone and world economy into disorder.
"If Greece had gone bankrupt, there would have been a domino effect that would have affected everybody. The entire euro zone risked being taken down," Mr Sarkozy said.
