It appears as though once again Greece is on the precipice of defaulting on international loans as less than half of the country’s creditors voted in favour of a £172 billion bond swap. Along with 30 banks in Europe, HSBC, Barclays and the Royal Bank of Scotland voted for accepting the deal but this was not a high enough percentage to pass. In order to be free from defaulting, 95% need to be in agreement and those 33 banks are not enough to keep that from happening.
At the moment, only 40.8% are in accordance with the deal and that is less than half the number needed to prevent default. During all this turmoil, German finance minister, Wolfgang Schaeuble has been talking to the finance minister from Greece, Evangelos Venizelos as to whether it would be a prudent move to have Greece exit the euro. According to Schaeuble, Greece has not been adding what is necessary to be a member of the common currency.
At the moment, creditors are being given until 8PM GMT to agree to the bond restructuring which is on record as being the largest ever attempted. However, 95% of those creditors must be in agreement which would amount to a loss of about 75% and if it they can agree, it will be counted as voluntary. Even so, analysts are saying that this is asking too much of creditors. At some point the Collective Action Clauses may be called up which would impose acceptance if anywhere between 66 and 95% can agree to accept terms of the deal. This would constitute default in the eyes of rating agencies, however.
According to the debt management agency in Greece, there simply aren’t the funds available to satisfy those creditors who will not vote in favour of the deal and at the same time, pension funds in Greece are saying they will not approve the swap either. If this bond swap isn’t agreed upon, Greece could be heading towards default and perhaps a forced exit from the euro.