By TraderVox.com
The EU is facing its first biggest test on the attempts to move past the two-year debt crisis when the private creditors in Greece decide whether to sign the biggest sovereign debt restructuring in the history of the union. Many investors are keeping a close eye on the events towards this deadline as creditors prepare for this signing.
The 106 billion debt-swap deal is hanging on the shoulders of the investors as Greece hopes for the 74% participation which is required for the deal to succeed. If creditors refuse voluntary participation, Greece may need to revert to legal action to force them to sign. This would be seen as a negative sign for the European Union. The debt swap deal was confirmed last week on the eve of the European Union summit. The deadline for the investors to sign the deal is March 8th. A day later, on March 9th, the euro-zone Finance Ministers will hold a teleconference to review the outcome of the deal.
According to Erik Nielsen, a Chief Global Economist at UniCredit SpA in London, the European debt-crisis is far from over. He added that there might be enough creditors who will participate in the write down to avert triggering collective action clauses that can be used by Greece to compel investors to participate in the debt swap. But this will not indicate that the crisis has been completely solved and how Greece progresses from there will be of critical importance.
The government of Greece has set a participation of 75 percent as the threshold for going on with the transaction. The investors are expected to forgive Greece 53.5 percent of their principal. They will also be expected to exchange their remaining holdings for Greek government notes and bonds from the European Financial Stability Facility. EFSF was authorized to release the bonds last week by the finance ministers in the region. Euro-zone leaders indicated that they will be moving their focus away from budget-cutting efforts to growth measures after completing the details of the second bailout for Greece.
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