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Market Should Be Assured by Debt Deal: Greek Minister

Greece has been tossed on the turbulent sea of global markets for almost two years now – but the bond swap deal secured on Friday should reassure markets about the country’s future, Greek Finance Minister and possible future prime minister Evangelos Venizelos told CNBC.

A man holds a placard bearing the Greek flag.
Anne-christine Poujoulat
A man holds a placard bearing the Greek flag.

“Now we have a sustainable debt for a sustainable country,” he said. “And now we can persuade the market because we have a new, very important and very concrete argument: the sustainability of the public debt after the PSI (the private sector investor deal).”

“We have a very clear political declaration and position from the part of our institutional partners. We have a very clear statement from the part of the Eurogroup, but also of the Euro Summit. We have the support of the so-called “Official Sector” until the return of Greece in the market,” he added.

Greece’s struggle under the weight of a 160-percent plus debt-to-GDP ratio and 20 percent unemployment has been one of the biggest factors affecting global markets for close to a year. Investors feared that if the Mediterranean country defaulted on its debt repayments, the end result could be the demise of the single currency itself.

The International Swaps and Derivatives Association said late Friday that a “credit event” – or technical default – had occurred in Greece. However, the country secured enough backing from bondholders to force those who haven’t backed the deal to accept it anyway, via collective action clauses. This should seal its second bailout deal, 130 billion euros ($170 billion) from fellow European Union countries and the International Monetary Fund.

“After many months we have another, more constructive, more positive atmosphere not only within the eurozone but also worldwide. And this is something very important for our pride, for our dignity because we need not only financial support but also moral support,” Venizelos said.

European equity markets, which climbed up at the end of last week ahead of 83.5 percent of Greece’s bondholders consenting to a key debt swap deal which reduced the value of their debt, fell on Monday morning as the market focus turned to other peripheral euro zone countries. The euro fell against the dollar after positive US jobs data Friday.

Doubt has been cast on whether Greece can follow through with the austerity measures that are part of the bailout package. Its population is already facing 20 percent unemployment, and thousands have taken to the streets of Athens in recent weeks to protest against the measures. Parties that don’t back the deal—now enjoying the majority of Greeks’ support—continue to gain in opinion polls ahead of an election expected in late April or May.

Venizelos could become prime minister later this year if his Pasok party claws back recent poor performance in the polls. He is the only candidate to lead the party in elections later this month.

He reaffirmed the current technocratic government’s commitment to the bailout package, which he called a “double game change” for Greece.

“We need the implementation of the new package and the recapitalization of the Greek banking system because the first point, the first instrument for growth and prosperity is the necessary liquidity for the real economy. Only through a new recapitalization and a really strong banking system can we achieve our target on the field of liquidity,” he said.

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