December 6, 2023

World Briefing | Europe: Greece: Oligarch Under Arrest Expected to Be Moved to Prison

A Greek magistrate on Friday ordered that the oligarch Lavrentis Lavrentiadis, who was arrested Thursday on charges of embezzlement and fraud, be remanded to custody after visiting the 40-year-old businessman in an Athens hospital. Mr. Lavrentiadis, the former majority stakeholder in Proton Bank, which is alleged to have issued $900 million in bad loans to keep other businesses afloat, is the focus of an investigation that has highlighted concerns about deep-rooted corruption and crony capitalism in Greece. He was admitted to the hospital on Thursday night after citing health problems when the police visited his home in an affluent Athens suburb. Mr Lavrentiadis was expected to be transferred to the capital’s high-security Korydallos prison on Saturday after his request to be admitted to a psychiatric hospital was turned down and he spent Friday night in police custody.

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Greece Extends Deadline for Debt Buyback

LONDON — Greece, on the verge of completing a crucial plan to reduce its debt burden, extended for another two days the deadline for foreign investors and Greek banks to sell their deeply discounted bonds back to the government.

Announced a week ago, the deadline for taking part in the buyback was to have been last Friday. But even though Greek banks and hedge funds offered close to €26 billion in bonds, the government fell short of the goal of €30 billion, or $39 billion, that its international creditors have set as a minimum for the deal to be called successful.

The new deadline is noon in London on Tuesday.

Having borrowed €10 billion from one of the European bailout funds to buy back the debt, the goal is for net debt relief of €20 billion — an amount the International Monetary Fund has said Greece must retire if the institution is to keep lending to the country.

Bankers close to the deal say that hedge funds, which for weeks have been coy about whether they might agree to sell at what would be an average price of around 33 cents per euro, have participated in larger-than-expected numbers. And they still expect the buyback to be completed. But with Greek banks reluctant to sell all of their restructured bonds back to the government, the buyback’s success remains very much dependent on foreign investors selling the majority of their holdings.

While Greek banks are believed to own €17 billion worth of bonds, they have not tendered the entire amount. Unlike foreign investors, many of whom bought the securities at knockdown prices, the Greek banks will not be reaping big profits from selling the bonds at around 33 cents per euro. Bankers estimate that foreigners, which own about €24 billion worth of bonds, have offered between €15 billion and €17 billion in debt so far.

At a time when blue-chip collateral is hard to find in Europe, the restructured bonds are seen by the Greek banks as a premium asset that can be used to borrowing much-needed funds from the European Central Bank.

“If the foreigners do not come in we are toast,” said one banker who was involved in the transaction but requested anonymity because he was not authorized to speak publicly.

The head of the Greek debt management agency, Stelios Papadopoulos, in a statement Monday, made it clear to reluctant investors that they may never get another chance to sell their debt at prices as high as the government is offering.

“Investors should bear in mind that even if Greece accepts all bonds tendered in the invitation, it will continue to engage with its official sector creditors in considering further steps to put its debt on a sustainable path,” Mr. Papadopoulos said in the statement. “Future measures may not involve an opportunity to exit investments in designated securities at the levels offered for this buyback.”

Such measures might include a second offering at a lower price, with the government invoking collective action clauses to force holdout investors to accept the revised terms. The government could also try to use provisions in the bond contracts that might allow Greece to keep paying its European creditors while forcing private-sector bondholders to take losses.

Such steps are aggressive, though, and. as the bonds are government by English law, would surely be challenged in British courts by foreign investors. And given the recent successes that hedge funds have had in suing Argentina and Ireland with regard to past bond restructurings, Greece — and Europe — will think long and hard before taking this type of action.

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Greece Announces Terms of $13 Billion Bond Buyback to Slash Debt

Opinion »

Editorial: Marine Life on a Warming Planet

The plan of one state, Washington, to save its shellfish from the ravages of ocean acidification.

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Greek Deal Unlikely Before Next Week

ATHENS (Reuters) – The Institute of International Finance said on Saturday that talks on a Greek debt swap deal were continuing and its chief’s departure from Athens was scheduled and not unexpected.

Charles Dallara, who negotiates a Greek debt swap in the name of creditors, had “longstanding personal appointments” out of Greece, the IIF said in a statement.

Greek government officials said late on Friday that talks in Athens were expected to continue on Saturday.

“Talks are continuing,” the IIF said in a statement. “A team of experts representing the Steering Committee remains in Athens and will be working with government officials on many aspects of the PSI.”

(Writing by Ingrid Melander; Editing by Dina Kyriakidou)

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World Briefing | Europe: Greece: I.M.F. Official Urges More Austerity

Greece has reached its taxation limit and needs to refocus its austerity program on long-term spending cuts, the International Monetary Fund mission chief in Greece, Poul M. Thomsen, left, said Tuesday. Mr. Thomsen also said the structural changes Greece has made in an effort to cope with its huge amount of debt, including slashing salaries and pensions and imposing several rounds of tax increases, have fallen “well short” of expectations, but he did not say what austerity measures would be needed next year.

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Greece Adopts New Property Tax

Opinion »

Fixes: Drugs, Risk and Myth

Some claim that an anti-overdose drug is not safe. Others, that drug users’ lives are not worth saving. Both claims are wrong.

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Greek Bailout Negotiator Predicts Some Benefits for Banks

Many analysts have been skeptical that the agreement reached Thursday by European leaders, which calls for banks to accept a 21 percent cut in the value of their Greek bonds, will bring lasting relief to Greece or ease market tensions.

But Charles H. Dallara, managing director of the Institute of International Finance, whose members include most large global banks, said the accord would help prevent fears about Greece from infecting other countries like Spain and Italy and undermining confidence in banks.

“The uncertainty swirling around this deal was catalyzing negative contagion in two directions,” Mr. Dallara said. “Now there is a sense that the losses are understood and broadly viewed as quite manageable.”

Mr. Dallara, who is based in Washington but spent five weeks in Europe before the deal was announced last week, said by telephone on Sunday that the rescue package would also give Greece a chance to turn around its dysfunctional economy.

“There is no other economy in Europe within miles of Greece in terms of distortions and imbalances,” he said. “If one can create conditions for growth, that will make all the difference. That will be the ultimate test of whether this will work.”

The Institute of International Finance has estimated that the deal will cost banks and other investors 54 billion euros, or $78 billion, but Mr. Dallara acknowledged that it was difficult to determine the real cost.

Some banks have had losses from holdings of Greek debt and others have not. Banks that swap their Greek bonds for new ones with lower interest payments, but more security, will take write-offs that will hurt earnings.

Before the deal, the European Central Bank firmly opposed any plan that credit rating agencies would see as a partial default, as is the case with this plan. But Mr. Dallara said that banks and government negotiators realized early in the talks that a default would be hard to avoid.

Rather, the talks focused on finding a way for investors to contribute, as Germany demanded, but in a manner acceptable to the banks and other bondholders. Mr. Dallara said a turning point in the talks came at a meeting in Paris in mid-July, when European governments agreed to a plan for banks to swap Greek debt for new securities backed by collateral.

From that point, talks focused on details of the plan, Mr. Dallara said. In the days before the announcement of the deal late Thursday in Brussels, Josef Ackermann, chief executive of Deutsche Bank and chairman of the institute, used his political acumen to complete the package with European leaders.

Mr. Dallara noted that Greece still faced a huge struggle, but said, “I think this gives Greece the wind at its back that it needs.”

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Business Briefing | EARNINGS: New McCafé Beverages Lift Results at McDonald’s

Opinion »

Editorial: Some Sense in Europe

The European Union leaders have finally approved a bailout loan for Greece and others, but the economic crisis is far from over.

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Business Briefing | MEDIA: Shake-Up at Markets Division of Thomson Reuters

Opinion »

Editorial: Some Sense in Europe

The European Union leaders have finally approved a bailout loan for Greece and others, but the economic crisis is far from over.

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Off the Charts: Striving for Productivity, Chasing Germany

New figures released by the European Central Bank indicate that progress is being made, but it is slow.

The figures show that unit labor costs fell 3.3 percent in Greece during the first quarter, and were off 2 percent in Ireland. In Germany, the star economy of the euro zone, unit labor costs fell 0.7 percent.

Those reductions were won at a terrible cost, however. Greece’s economy continues to shrink, while Ireland’s seems to have stopped losing ground but has yet to grow. Unemployment is above 14 percent in Ireland and even higher in Greece.

The accompanying charts show the changes in unit labor costs in Ireland and Greece, as well as in Germany and four other large economies that use the euro — France, Italy, Spain and the Netherlands. The E.C.B. said similar figures for Portugal, the other bailed-out euro country, were not available.

The first set of charts show the changes from the first quarter of 2010, just before the first Greek bailout forced the country to agree to a harsh austerity program, through the first quarter of this year, the latest figures available.

During that period, Greek unit labor costs fell 7 percent, nearly twice as much as those in Germany. Ireland’s costs were down almost 6 percent.

But all the other major countries continued to lose ground to Germany.

The second set of charts shows the changes in unit labor costs since the end of 2000, when Greece joined the euro zone. The figures are astounding. Germany’s unit labor costs declined nearly 7 percent over the period, a remarkable performance. All the other countries had increases, ranging from 11 percent in France to more than double that figure in Ireland.

If there were no euro, other European currencies would almost certainly have lost value against the German mark over the last decade. Instead, Germany’s trade surplus in goods rose sharply, while the rest of the euro zone’s combined trade deficit approximately doubled.

The reconvergence of the economies might be easier if Germany were to accept inflation, but it shows little inclination to do that. Indeed, largely because Germany has been growing at a rapid rate with some signs of inflationary pressures, the E.C.B. has begun to raise interest rates.

Unit labor costs are not the only variable in a country’s trade performance, of course. But they are important. The rest of the euro zone still has a long way to go if it is to regain the competitive position it had only a few years ago.

Floyd Norris comments on finance and the economy in his blog at

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