Greece moves to pass bailout laws


The Greek parliament scrambled today to pass laws needed to secure payment of a second international bailout for the debt-laden country as workers and pensioners angered by austerity measures protested outside.

MPs set to work on a flurry of measures demanded by euro zone states in exchange for a €130 billion rescue, as Dutch finance minister Jan Kees de Jager maintained a barrage of scepticism about Athens' ability to meet its reform commitments.

"To be honest, I have doubts, but it's the best we could do,"  Mr De Jager told French daily Le Monde when asked whether Greece could implement the new bailout programme agreed by euro zone ministers early yesterday.

He called for a strengthening of the euro area's financial firewalls around Greece, combining the current temporary rescue fund with a new permanent €500 billion one due to come into force in July - a move so far opposed by Germany.

Credit ratings agency Fitch downgraded Greece further ahead of a planned bond swap under which it will enforce sharp losses on private creditors as part of the bailout programme.

It was the first of widely expected cuts from all rating agencies because Greece will pass into technical default on its liabilities once the transaction is completed, which Greek finance minister Evangelos Venizelos said must take place by March 12th.

"The exchange, if completed, would constitute a 'distressed debt exchange'," Fitch said in a statement downgrading Greece to C from CCC.

When the bond swap is finished the Greek sovereign rating will drop further to 'restricted default' and then will be re-rated again "at a level consistent with the agency's assessment of its post-default structure and credit profile," Fitch said.

Under the terms agreed yesterday, private holders of just over €200 billion of Greek bonds will take a loss of 53.5 per cent in the face value of their holdings to ease Athens' debt burden.

Laws to enact the debt swap went to parliamentary committee today and are set to be adopted in plenary tomorrow.

"To implement all the agreements reached in Brussels on February 21st and meet tight deadlines the formal announcement of the PSI (debt swap) offer must take place no later than Friday," Mr Venizelos told parliament's economic affairs committee.

The legislation requires that investors get at least 10 days to consider the transaction and creates so-called "collective action clauses" (CACs) forcing all bondholders to proceed with the transaction once it has won a specified level of approval.

According to the draft law, the swap will go ahead once a 50 per cent quorum of bondholders have responded to the offer and the CACs will be activated once a two-thirds majority of that quorum have voted in favour of the swap.

The debt swap is a vital part of a plan to cut Greece's liabilities from 160 per cent of gross domestic product to 120.5 per cent by 2020, according to the terms of the Brussels deal.