Moody's declares Greece in default of debt

WASHINGTON - Moody's declared Greece in default on its debt Friday after Athens carved out a deal with private creditors for a bond exchange that will write off 107 billion euros (S$175.9 billion) of its debt.

Moody's pointed out that even as 85.8 per cent of the holders of Greek-law bonds had signed onto the deal, the exercise of collective action clauses that Athens is applying to its bonds will force the remaining bondholders to participate.

Overall the cost to bondholders, based on the net present value of the debt, will be at least 70 per cent of the investment, Moody's said.

"According to Moody's definitions, this exchange represents a 'distressed exchange,' and therefore a debt default," the US-based rating firm said.

For one, "The exchange amounts to a diminished financial obligation relative to the original obligation."

Secondly, it "has the effect of allowing Greece to avoid payment default in the future."

Ahead of the debt deal, Moody's had already slashed Greece's credit grade to its lowest level, "C," and so there was no impact on the rating.

Moody's said it will revisit the rating to see how the debt writedown, and the second eurozone bailout package, would affect its finances.

However, it added, at the beginning of March "Moody's had said that the risk of a default, even after the debt exchange has been completed, remains high."

Eurozone agrees to unlock 8b euro loan for Greece

BRUSSELS: Eurozone finance ministers on Friday agreed to unlock an eight-billion-euro slice of aid to help debt-laden Greece, EU diplomats said.

Ministers of the 17-nation eurozone "have given their agreement for the sixth tranche of aid to Greece," the diplomat said, referring to debt funding provided in a 110-billion-euro rescue package for Greece agreed in May 2010.

A second diplomat confirmed the breakthrough.

The tranche of aid is crucial for debt-stricken Greece which faced running out of money to pay civil servants and pensions in mid-November.

It had been blocked since mid-September as a team of EU, European Central Bank and International Monetary Auditors scrutinised the Greek government's reform efforts.

On Thursday, the Greek parliament approved a controversial government list of even tougher austerity measures demanded by the auditors and which have sparked violent street protests.

Some 35,000 people gathered in Athens on the second day of a general strike on Thursday that crippled the public sector and much of the country.

The protests turned violent and police said a man in his fifties died in hospital. Authorities declined to speculate on the cause of death, but Greek media said he was hurt on the sidelines of the protests.

Another key sticking point is how much of Greece's debt mountain can safely be written off without spreading the debt crisis to other under-pressure economies such as Italy and Spain.

This pivotal point, however, is unlikely to be resolved before a meeting of EU leaders on Wednesday, amid differences between France and Germany over the "haircut" to be applied to Greece's 350 billion euros of debt.