Greek Yields Rise on Debt Restructuring Report - Wall Street Journal

By ALKMAN GRANITSAS

ATHENS?Greek bond yields rose on a report that the country has put forward a plan to restructure its debt after 2013 in coordination with other highly-indebted euro-zone member state like Ireland and Portugal.

Without citing sources, the pro-government Ta Nea daily newspaper said Thursday that Greece has unofficially presented the plan to officials at the European Commission, the German government and the ECB. It says that the Commission has given a positive response to the proposal.

This would mark the first time that the government is considering a renegotiation of interest payments on its existing debt held by private investors.

A Greek government official declined to comment on the article, saying "we do not comment on speculation."

The government wouldn't seek a discount on the face value of existing bonds nor any kind of restructuring before 2013, which is when its current loan agreement with the European Union and International Monetary Fund expires, according to the newspaper. Instead, the plan calls for both a restructuring of privately held debt and an extension in the repayment period of the EU and IMF loan?an idea that has already been floated publicly, the newspaper said.

Greek bond yields rose on the report, and the 10-year yield hit 12.165%, up 0.19 percentage point on the day. The gap between 10-year German and Greek bond yields widened 0.16 percentage points to 9.208 percentage points.

In May, Greece narrowly avoided default with the help of a ?110 billion ($144.09 billion) bailout from the EU and IMF, in exchange for tough economic reforms while also cutting its budget deficit to below 3% of gross domestic product by 2014.

Ireland also has received a bailout package, but Portugal has not. However, it is considered one of the more fiscally challenged members of the 16-nation euro bloc.

Despite the aid package, Greece continues to face high borrowing costs on international markets amid investor concerns about the country's ability to pay off its massive government debt which is expected reach 150% of gross domestic product by 2013.

To assuage those concerns, European finance ministers last month said they would consider prolonging the repayment period on their portion of the ?110 billion loan until 2024 from 2018, with a decision expected early next year. The IMF has also supported the idea.

According to the newspaper, the debt restructuring plan comes after weeks of internal discussions and after consultation with Bank of Greece Governor, George Provopoulos, and former European Central Bank Vice President Lucas Papademos, who is now acting as an adviser to the Greek government.

The newspaper said any move to restructure the debt would be conditional on Greece first fulfilling the economic and fiscal reforms it has pledged to under its three-year loan agreement with the EU and IMF.

?Neelabh Chaturvedi in London contributed to this article.

Write to Alkman Granitsas at alkman.granitsas@dowjones.com

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