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Greece to go ahead with crucial debt swap Greek debt swap 'success' welcomed by European leaders
(about 2 hours later)
  
Greece has said it has received enough backing to push through the largest restructuring of government debt in history. Greece's winning of a crucial swap of its government debt has been welcomed by European leaders.
Holders of 85.8% of debt subject to Greek law and 69% of its international debt holders agreed a debt swap, according to the Ministry of Finance. The nation said it has received enough backing to push through the largest restructuring of government debt in history.
Take-up was high enough for the government to force unwilling investors to consent to the deal.Take-up was high enough for the government to force unwilling investors to consent to the deal.
Athens needed to get 75% to push through the deal. The Greek Finance Minister, Evangelos Venizelos, hailed the deal as an "exceptional success".
The European Union and International Monetary Fund have said that if the debt swap does not go through then Greece will not get its latest bailout of 130bn euros (£110bn; $173bn). Holders of 85.8% of debt subject to Greek law and 69% of its international debt holders agreed a debt swap, according to the Ministry of Finance.
The Greek Finance Ministry had made it clear that the alternative to the debt swap is a potential default. Athens needed to get 75% to push through the deal, which is a condition of Greece's latest bailout.
The European Union and International Monetary Fund have said that if the debt swap did not go through then Greece would not get its latest bailout of 130bn euros (£110bn; $173bn).
EU economic affairs commissioner, Oli Rehn said he was pleased with the debt deal but expected Greece to maintain it's focus on austerity.
"I am very satisfied by the large positive turnout of the voluntary debt exchange in Greece," he said.
And a spokesman for German Chancellor Angela Merkel said take-up was "encouraging".
European leaders are due to discuss the deal on Friday ahead of a meeting next week to agree on the bail-out.
'Historic endeavour''Historic endeavour'
The Greek Finance minister, Evangelos Venizelos, told parliament on Friday that the deal - which cuts Greece's debts by around 105bn euros ($138.8bn, £87.9bn) - meant it was a "good day" for Greece.
"We have achieved an exceptional success... and I believe everyone will soon realise that this is the only way to keep the country on its feet, and give it the second historic chance that it needs," said Mr Venizelos.
The Greek government has promised to continue implementing austerity measures demanded by the EU and IMF.
So far the deal involves 172bn euros worth of debt, according to the Greek government website, with investors taking a total loss of up to 74%.So far the deal involves 172bn euros worth of debt, according to the Greek government website, with investors taking a total loss of up to 74%.
The deal should cut 107bn euros from Greece's total government debt. The International Swaps and Derivatives Association will meet later on Friday to determine whether the deal would be deemed a credit event - a technical default - triggering the payment of insurance of up to $3.2bn, significantly less than feared.
Investors are now waiting to see if forcing Greek bondholders to take the deal - or enforcing so-called Collective Action Clauses - will be deemed as a default. Market reaction to the news was subdued on Friday with little change on most European markets.
The International Swaps and Derivatives Association will meet later on Friday - at 13:00 GMT - to determine whether the deal would be deemed a so-called "credit event" - a technical default - which would trigger the payment of credit-default swaps, which is essentially insurance against a default. Stock exchanges had rallied strongly on Thursday on hopes that the deal would go through - with the stock market in Athens up more than 3% and the markets in Paris and Frankfurt also higher.
However, the ISDA reports that CDS payouts are likely to be around $3.2bn, so lower than previously feared.
'Appreciation'
Markets rallied strongly on Thursday on hopes that the deal would go through - with the stock market in Athens up more than 3% and the markets in Paris and Frankfurt also higher.
Greece said it has extended the deadline for bondholders not governed by Greek law to sign up until 23 March.Greece said it has extended the deadline for bondholders not governed by Greek law to sign up until 23 March.
"On behalf of the republic, I wish to express my appreciation to all of our creditors who have supported our ambitious programme of reform and adjustment and who have shared the sacrifices of the Greek people in this historic endeavour," Finance Minister Evangelos Venizelos said.
"Greece will continue implementing the measures needed to achieve the fiscal adjustments and structural reforms to which it has committed, and that will return Greece to a path of sustainable growth."
Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms:
AAA-rating The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is minuscule. Glossary in full No better offer?
The deal was also welcomed by representatives of private sector lenders to Greece, who said it paved the way for agreement on the EU bailout.The deal was also welcomed by representatives of private sector lenders to Greece, who said it paved the way for agreement on the EU bailout.
"The very strong and positive result provides a major opportunity now for Greece to move ahead with its economic reform program, while strengthening the euro area's ability to create an economic environment of stability and growth," said Josef Ackermann, chairman of the International Institute of Finance, which represents private lenders."The very strong and positive result provides a major opportunity now for Greece to move ahead with its economic reform program, while strengthening the euro area's ability to create an economic environment of stability and growth," said Josef Ackermann, chairman of the International Institute of Finance, which represents private lenders.
Economic and Monetary Affairs Commissioner Olli Rehn said earlier this week that there would be no better offer. Austerity cuts
He said: "It is important that all investors recognise that Europe has committed the maximum funds available to this voluntary debt exchange and that full participation is necessary for the Greek programme to move forward." The news comes as the latest GDP figures for Greece showed the economy contracted by 7.5% in the final three months of 2011.
The Greek bailout is also conditional on the country implementing a further round of austerity measures. The revised figures are worse than the previously estimated 7%.
The weak economic data comes ahead of a further round of austerity measures.
Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms:
AAA-rating The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is minuscule. Glossary in full
The government is pushing through spending cuts equal to 1.5% of its output, including cuts in pensions and civil service job cuts.The government is pushing through spending cuts equal to 1.5% of its output, including cuts in pensions and civil service job cuts.
It has also been told to make its economy more competitive by cutting the minimum wage and making labour markets more flexible.It has also been told to make its economy more competitive by cutting the minimum wage and making labour markets more flexible.
The aim is to cut the Greek government's debt from 160% of GDP to a little over 120% of GDP by 2020.The aim is to cut the Greek government's debt from 160% of GDP to a little over 120% of GDP by 2020.
Some economists fear further austerity measures will damage the economy increasing the chance Greece will require more bailouts or debt write-offs.Some economists fear further austerity measures will damage the economy increasing the chance Greece will require more bailouts or debt write-offs.
The economy shrunk by 7% in the three months to December, compared to the same period in 2010.
Others argue the economy will become more competitive, attracting investment and generating jobs.Others argue the economy will become more competitive, attracting investment and generating jobs.
"This does not mean the debt situation in Greece is resolved, and this is not the last time we will be hearing about this. But it is a relief that it didn't go the other way. It could have been a lot worse," said Tim Ghriskey, chief investment officer at Solaris Group in New York."This does not mean the debt situation in Greece is resolved, and this is not the last time we will be hearing about this. But it is a relief that it didn't go the other way. It could have been a lot worse," said Tim Ghriskey, chief investment officer at Solaris Group in New York.