Following a hard-won agreement for a second bailout from the European Union, European Central Bank and the International Monetary Fund, known as the troika, Greece has more work to do. On Wednesday, Parliament began debating a new law to compel reluctant private bondholders to accept steep write downs on its sovereign debt once two thirds of such investors have agreed to do so. A parliamentary committee approved it.
Reuters reported that the bill, called Collective Action Clauses (CACs), will impose the debt swap of existing bonds for new, lower-value debt with lower coupon rates on Greece’s creditors.
The debt swap is an essential part of the 130 billion euro ($172 billion) bailout deal, since it will substantially cut Greece’s liabilities, but it has been held up in part by hedge funds reluctant to accept cuts and instead considering triggering credit default swaps for full repayment. There has also been substantial debate over the coupon rate on the new bonds.