The Greek government braced for further anti-austerity protests, while the country's parliament was debating legal changes that would clear the way for a massive debt restructuring to keep Greece from defaulting on its loans next month.
The legislation retrofits outstanding Greek bonds with so-called collective action clauses, aimed at forcing losses on bondholders who may resist a voluntary debt restructuring that will see private sector creditors who own some €200 billion of Greek bonds take a 53.5 per cent haircut.
The Greek government is aiming for minimum participation of at least two-thirds of bondholders in a planned debt exchange, a finance ministry official said on Tuesday, with a formal offer on the exchange expected to come by the end of this week.
The debt write-down plan aims to erase some €107 billion from Greece's sovereign debt burden. It is part of a related €130 billion loan deal agreed to by eurozone finance ministers
Speaking to parliament's finance committee, Evangelos Venizelos said the change in the legal framework was part and parcel of convincing the country's private sector creditors to participate in a voluntary €100 billion debt write-off. "The new bonds will fall under English law, because no one will participate in this procedure if they know it is under Greek law", Mr Venizelos said.
Greece's international creditors insisted that the new bonds should be governed by English law, because in that case Greek lawmakers can't review the legal terms of the deal. If the bonds were governed by Greek law, it would be easier for the Greek legislature to pass a law that simply amends the bonds. The right to sue in an English court offers investors a greater chance of holding out against any potential restructuring offer.
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