Peter Bofinger, the well known German economist and prominent member of the prestigious Council of Economic Experts, which advises the Berlin government and Parliament on economic policy issues, said this week that he expects Greece to undergo a new rearrangement of its sovereign debt not later that this summer.
It was a rather awkward statement by someone who is well aware, if not deeply implicated in planning the current rearrangement of the Greek debt, which is still in progress on its foreign law bonds segment.
At this point it has to be remembered that the bulk of the privately held Greek debt, of approximately €207 billion, issued under Greek law underwent a 'haircut' of 53.5% at the beginning of March 2012, according to a Private Sector Involvement (PSI) agreement struck with the country's private lenders (banks). In this PSI exercise, a majority of around 75% of the private holders of Greek bonds accepted voluntarily to exchange their portfolio of Greek bonds for cash and new bonds issued by the European Financial Stability Facility (EFSF). They received a 15% in cash and 31.5% in new titles, accepting losses of around €106bn.
After this, the Athens government activated the Collective Action Clauses and forced the rest of the private holders of its bonds to suffer the same treatment. Still, there is in progress a similar procedure covering the Greek bonds which were issued under foreign law. This last exercise is expected to be concluded by 16 April. In short the current rearrangement of the Greek debt is still in progress.