Greek parliament approves debt writedown deal

Feb 23, 2012, 15:19 GMT

Athens - A deal to reduce nearly 107-billion-euros (142-billion-dollars) of Greece's privately held debt was approved by the country's parliament on Thursday.

The emergency legislation was passed by a show of hands in a virtually empty parliament as the two parties that back Prime Minister Lucas Papademos' governing coalition stated their support for the swap deal. There was no roll call vote.

Banks and other private bondholders will officially receive the proposal, which would require them to forgive significant amounts of debt, on Friday, reported the Finance Ministry. They will then be given 10 days to respond and say whether they will take part in the plan.

The Finance Ministry is eager to complete the deal by March 12.

Under the deal, private bondholders will exchange their devalued Greek government bonds for new ones with a value 53.5 per cent lower than the original. They would also have lower interest rates and longer maturities.

Several Greek newspapers quoted Finance Ministry officials as saying that Greece is hoping that voluntary participation in the bond swap will reach or exceed 85 per cent of creditors.

The writedown on banks, pension funds and other private holders of Greek government bonds was already agreed to by eurozone finance ministers this week as they considered a new 130-billion-euro bailout.

Speaking in parliament ahead of Thursday's vote, Finance Minister Evangelos Venizelos said passing the bond swap was the only way to save the country.

'Greece has been given a window of opportunity and we must make the most of it.'

Thursday's vote comes a day after ratings agency Fitch downgraded Greece's debt by two notches, from CCC to C, the lowest possible level. It described the debt writedown deal with banks as 'a distressed debt exchange.'

Parliament was also expected to vote early next week on a bill outlining 3.2 billion euros in extra budget cuts, which will include further reductions to pensions and budgetary revisions. The bill also foresees bigger spending cuts in the areas of health, education and defense.

The draft law also drastically revises the 2012 budget, changing the country's deficit target to 6.7 per cent of gross domestic product, from an initial forecast of 5.4 per cent.

Several hundred health workers protested peacefully through Athens ahead of the vote, coinciding with a 24-hour walkout of state hospital doctors.