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Greek finance minister says debt buyback program must work

Yannis Stournaras

Yannis Stournaras

ATHENS — Greece’s plan to buy back some of its bonds from private investors ‘‘must succeed’’ as it is a vital part of efforts to reduce the country’s excessive debt, Finance Minister Yannis Stournaras said Wednesday.

The bond buyback is part of measures agreed in Brussels this week that included the release of $57 billion in critical rescue loans from the International Monetary Fund and the other 16 European Union countries that use the euro. The bulk of those funds are to be released by Dec. 13, with more than $12.9 billion to go to internal financing.

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Stournaras did not give details of the buyback scheme, which he said will be funded by about $16.7 billion to $18 billion, which will not come out of the $56.9 billion bailout installment.

He stressed that bondholders would not be forced into the scheme. ‘‘We have been asking for a buyback for months, it will happen, it will be voluntary, and nobody will be forced to take part. Everybody can take part if they want to, I believe it is an opportunity, at the prices involved.’’

Greece’s debt management agency is expected to give further details of the scheme early next week.

Facing a mountain of debt and a gaping budget deficit, Greece’s economy has been under close supervision since May 2010 by the IMF and eurozone countries, which have extended $310 billion in bailout funds to the country to prevent it from a messy default.

In March, Greece carried out a bond swap under which it traded its bonds held by private investors for new ones with lower values and longer maturity dates. That deal wiped $142.15 billion off of the country’s debt, with investors losing well over half the initial value of the bonds they held.

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Private bondholders involved in that scheme included Greek pension and social security funds, who lost significant parts of their savings.

Many analysts have cautioned that debt buyback plan will not be effective enough to get Greece’s debt under control, and that another debt write-off is probably necessary. But that option would be unpalatable for other European countries, already struggling to explain to their taxpayers why they would need to fund Greece further.

‘‘The ill-advised bond buy-back scheme highlights just how desperate eurozone governments are to avoid an outright write-down on their loans to Greece,’’ said Martin Koehring of the Economist Intelligence Unit.

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