Small Greek pension funds oppose debt swap

ATHENS - Agence France-Presse

An elderly man participates in a rally held by Greece's largest unions outside the Greek parliament in Athens, on Wednesday, Feb. 29, 2012. AP photo

Five small pension funds have declared their opposition to a huge debt writedown designed to prevent a sovereign default and that has been accepted by several global banks, Greek media reported on Wednesday.

The five Greek funds, which include pensions for self-employed staff, journalists and police, hold around two billion euros ($2.7 billion) in Greek bonds, about one percent of the total value of obligations earmarked for the debt swap.

Another half-dozen funds holding some 2.7 billion euros in bonds, including the country's largest social security institution IKA and prominent agricultural fund OGA, on Tuesday agreed to join the initiative, which aims to trim Greece's sovereign debt of over 350 billion euros by up to 107 billion euros.

Two more funds worth 1.7 billion euros are to decide on Wednesday.

One of them is the pension fund of civil servants, whose union Adedy yesterday stormed an earlier meeting and plans to do the same today.

Athens has already passed legislation to force recalcitrant bondholders to participate if a majority agrees to the debt rollover.

And Greece has warned that that rejection of the hard-won agreement to cut privately held debt could cost investors much more in the longer term.

"Greece's economic programme does not contemplate the availability of funds to make payments to private sector creditors that decline to participate," a statement issued by the Public Debt Management Agency (PDMA) said.

Banks, insurers and investment funds holding debt issued under Greek law must decide by 2000 GMT Thursday whether to write off half of the money they are owed, while those who hold debt issued under foreign law have until April 11 to decide.

The country's main six banks on Tuesday told Finance Minister Evangelos Venizelos that they supported the move, or would recommend such a course of action at board meetings to be held on Wednesday and Thursday, the ministry said.

For bonds issued under Greek law, Athens is targeting a participation rate of at least 75 percent of investors. Failing this it has said the operation might be called off, which could lead to a messy default as early as March 20.

Under the terms of the pending deal, private holders of Greek debt are to exchange a total of 206 billion euros in bonds for new debt with a 30-year maturity, EU-backed notes and securities linked to Greece's future output.

The country is due to reimburse 14.4 billion euros in debt on that date.