Greece has never discussed wider debt ...haircut: Official

ATHENS (AFP) ― Greece “has never discussed” the option of reducing its vast debt by 50 percent, a scope far wider than a rescue plan agreed with the EU in the summer, the government’s spokesman said on Monday.

“This discussion has never been held at government level,” Elias Mossialos told a media briefing.

“There are reports that others are examining it, not that we are ... we do not open such issues,” Mossialos said.

Greece in July brokered a 159-billion-euro ($214-billion) deal with the EU to help make its sovereign debt, currently at over 350 billion euros, sustainable.

Part of it involves bank creditors in Greece and abroad accepting a 21 percent “haircut” or reduction in value of the debt they hold in an exchange to lower Athens’ crippling repayments in the next few years.

But Greece’s continued trouble has led to speculation that a 50-percent ‘orderly’ haircut ― meaning with the consent of creditors ― will now be required to make a difference.

Top-selling Greek daily Ta Nea last week said that Finance Minister Evangelos Venizelos had evoked this scenario in closed-door talks with lawmakers.

The finance ministry later denied this was true.

A ING debt strategy, analyst Padhraic Garvey said that the overall message being sent by the market in Greek government debt “points to an intense market discount for an imminent default.”

He said “the markets are gunning for a resolution to the problem of Greek debt dynamics by already pricing in a haircut of some 60 percent, reflecting an average price in the area of 40 percent of par (face value).”

This market valuation meant that “there is little belief that the debt exchange is the solution.”

A prior bailout loan worth 110 billion euros from the EU, the International Monetary Fund and the European Central Bank, agreed last year, has proven insufficient to get the country back to its feet.

Part of that money, an eight-billion-euro instalment due in August, has been delayed amid criticism of Greece’s halting recovery efforts.

A team from the “troika” of Greece’s lenders is due to return to Athens to audit the government’s progress on commitments before it gets the new money, which the government needs to keep paying its bills through October.