Greece has requested an extension of the eurozone`s Master Financial Assistance Facility Agreement for a period of six months – the Greek government has officially included for the first time private sector participation (called psI), meaning that the private financial sector has accepted a “voluntary” haircut (finance). It was agreed that the net contribution of banks and insurance companies to Greece`s support would be in addition to an additional EUR 37 billion in 2014. [4] The proposed purchase of Greek bonds from private creditors by the euro bailout fund at face value will weigh at least an additional EUR 12.6 billion on the private sector. [5] The troika behind the second bailout has set out three requirements that Greece must meet in order to get the money. The first condition was to enter into an agreement whereby all private holders of government bonds would accept a 50% discount, with yields reduced to 3.5%, which would facilitate a reduction in Greek debt of 100 billion euros. The second condition was that Greece be forced to implement another ambitious austerity plan to bring its budget deficit back to sustainable ground. The third and final condition was that a majority of Greek politicians sign an agreement guaranteeing their continued support for the new austerity plan, even after the April 2012 elections. [10] On the night of 26-27 October, politicians took two important decisions to reduce the risk of possible contagion from other institutions, particularly Cyprus, in the event of Greece`s failure. The first decision was to require all European banks to be 9% fully funded to make them strong enough to cope with the financial losses that could result from a Greek default.
The second decision was to use the EFSF from 500 billion euros to 1 trillion euros as a firewall to protect financial stability in other eurozone countries, with a debt crisis looming. Leverage had already been criticized by many parties[7] because it was likely to pay because of the significantly increased risks that the EFSF took. [8] . On 3 March 2012, the Institute of International Finance declared that twelve of its steering committees would exchange their obligations and suffer a loss of up to 75%. [21] After all the assumptions were identified on 9 March and the Greek parliament then decided to activate a class action clause for bonds covered by Greek law, the total share of Greek government bonds exposed to debt exchange reached 95.7% (or 197 billion euros). The remaining 4.3% of bondholders who are subject to foreign law and refuse the debt swap (to the tune of 9 billion euros) have benefited from an additional two weeks to reconsider the swap and voluntarily join it. [22] In addition, eurozone countries have agreed on a plan to reduce Greece`s debt from 160% today to 120% of GDP by 2020. Under the plan, it was proposed that all Greek government bondholders “voluntarily” accept a 50% discount on their bonds (which has resulted in a debt reduction of 100 billion euros) and also agree that interest rates should be reduced to only 3.5%.
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