Give Greece 2nd Chance, Then Restructure: Analyst
Greece should receive another tranche of aid from the European Union to enable it to have a second chance and restructure later, according to an analyst.
“The key thing is that Greece’s debt is very high and the banks hold a significant amount of this debt and the situation needs resolution.
"There are three ways of dealing with this. The first one is rescheduling this debt, the second is to impose a voluntary exchange of debt and the third one is to apply a haircut. The third one is the worst possible option at this stage because the contagion risk is very high," said Alexander Kyrtsis, analyst at UBS.
“The most likely short term outcome is to give Greece a second chance and restructure later and Greece should proceed with the privatizations and providing a credible plan to contain the deficit and debt.”
He added that some Greek banks looked attractive to buy because some had a lower exposure to the Greek sovereign and because he believed Greece would get more aid from the EU. However, banks scheduled for privatization were less attractive.
“There might be some buying opportunities in the privatization story but the problem is that the banks that are being privatized hold significant amounts of Greek governed debt so one would have to look at that closely ,” Kyrtsis said.
“I think they will make a genuine attempt to go ahead with the privatisations, there is a very detailed plan now in place and we’ll get more details in the next few days and we’ll also see significant initiatives on the deficit containment side, meaning Greece’s attempts to improve tax revenue and also reduce public expenditure,” he added.