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Employes at the state-run Workers' Housing Organization, OEK, chant slogans as they hold a banner witch reads '' do not close down the OEK'' on Thursday, Feb. 23, 2012. (Petros Giannakouris/AP)
Employes at the state-run Workers' Housing Organization, OEK, chant slogans as they hold a banner witch reads '' do not close down the OEK'' on Thursday, Feb. 23, 2012. (Petros Giannakouris/AP)

Greek parliament approves debt swap for rescue Add to ...

Greece’s parliament endorsed a debt swap with private bondholders on Thursday that forms the core of its €130-billion bailout, despite new protests against tough budget cuts demanded in return for the rescue deal.

The swap, in which private investors exchange their bonds for lower-value debt, will slice €100-billion off Greece’s debt, a vital part of the EU and IMF bailout plan aimed at cutting Greece’s liabilities from 160 per cent of gross domestic product to 120.5 per cent by 2020.

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Greece’s second bailout since 2010 was approved by euro zone finance ministers on Tuesday, averting the threat of a messy bankruptcy next month but doing little to allay doubts about the country’s long-term financial and social stability.

With the ruling alliance of Socialist PASOK and conservative New Democracy having a safe parliamentary majority and with no request made for a named vote, the law passed automatically as soon as the debate was concluded, acting parliamentary speaker Anastasios Kourakis told the assembly.

“By approving this law, parliament will allow us to start getting out of the vortex,” Finance Minister Evangelos Venizelos told lawmakers earlier.

“To succeed, we need to be united, serious, trustworthy, persistent and to work, work, work,” he added.

The government says the offer must be made to bond holders by Friday and completed by March 12, before a March 20 deadline when €14.5-billion of debt repayments fall due.

New protests are planned on Thursday against €3.3-billion of budget cuts this year demanded in return for the rescue package, and left-wing parties opposed to the austerity package are gaining in opinion polls before elections likely in April.

Doctors and health workers joined the wave of public anger on Thursday, launching a 24-hour strike over pay cuts and calling a protest outside the Health Ministry. Hospitals were maintaining a minimum level of service.

“We condemn the policy of the government, the EU and the IMF, which is demolishing the state health care and killing its personnel,” hospital doctors from Athens and the port city of Piraeus said in a statement.

The country’s largest unions called a nationwide three-hour work stoppage on Feb 29. But government ministers argue the only alternative to the rescue deal would be bankruptcy and ejection from the euro single currency zone.

“There would be chaos,” Environment and Energy Minister George Papaconstantinou told weekly German newspaper Die Zeit.

“There would be queues outside the banks and the army and the police would have to intervene. We would no longer be able to import oil, natural gas or medicines from abroad.”

Private investors holding about €200-billion of Greek bonds will take a loss of 53.5 per cent in the face value of their holdings and a real loss of 73-74 per cent.

The legislation says investors get at least 10 days to consider the transaction and creates so-called “collective action clauses” (CACs), which force all bondholders to proceed with the swap once it has won a specified level of approval.

According to the law, the swap will go ahead once a 50 per cent quorum of bondholders have responded to the offer and the CACs will be activated once a two-thirds majority of that quorum have voted in favour of the swap.

The austerity measures have helped to plunge Greece ever deeper into recession and driven unemployment up over 20 per cent. Half of young Greeks are jobless.

The bailout deal buys time to stabilize the 17-nation euro zone currency bloc and strengthen its financial protection against a Greek default, which is a long-term threat.

The euro zone, and particularly northern members led by Germany, are deeply skeptical that Greek leaders will stick to the painful spending cuts and reforms after the election.

A new survey by pollster VPRC for the Epikera magazine on Thursday showed 76 per cent of respondents believed Germany was on balance “rather hostile” to Greece, and 73 per cent said they had a negative attitude towards Chancellor Angela Merkel. The telephone survey was taken from a sample of 805 people.

Greece must adopt a series of laws in the coming days needed to implement cuts to public sector spending and pensions to clinch the funds.

Officials from the International Monetary Fund said the lender was weighing up the size of its contribution given that Athens is near the limits of what it is allowed to borrow.

European and IMF sources have told Reuters the Fund could contribute €13-billion in new money on top of €9.9-billion still unpaid from the first bailout.

The United States, the biggest contributor to the IMF, welcomed the bailout deal, but said on Wednesday that Europe should do more to prevent any risk of contagion.

“We believe that the IMF should continue to play a constructive role in Europe, but IMF resources cannot be a substitute for a strong and credible firewall,” Lael Brainard, the U.S. Treasury Department’s under secretary for international affairs, said before a Group of 20 meeting this weekend.

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