The Chairman of Piraeus Bank, Michalis Sallas, in response to relevant queries of the press regarding the “haircut” on the Greek bonds:
Those who support a wider “haircut” on the Greek bonds, ie a reduction that extends more than 21%, can be divided into two categories: The first category comprises those who have nothing to lose, nor from the collapse of Greece and certainly not from their portfolios. The second category includes those who have not understood anything from the consequences of this action and probably not even what this “haircut” is about. The sad thing is that the last category includes people who should have known better.
Based on the holdings that are estimated to have been declared for the voluntary PSI of the 21st of July, and if we accept that instead of 21% “haircut” (that was provided by the decision of the European Council) we will now have a voluntary “haircut” of 50%, in essence this would lead to a further decline of Greek government debt only by 20 to 25 billion euros at current values, and not 180 billion Euros, contrary to what many believe, either due to naiveness or because of inadequate information. In effect, the benefit would be between 20 and 25 billion, for which, in any event, Greece will be forced to find bilateral financing by European countries or the IMF, in order to strengthen the state-owned pension funds and to recapitalize its banks. At the end of the day, we are talking about a benefit of 10 or 15 billion from a total debt of 360 billion Euros! Unfortunately, it has not been fully understood that from the proposed “haircut” through the PSI there is a wide exclusion for a range of Greek state liabilities, such as the bonds held by the ECB (at par value of €60 billion), the bilateral loans that have been already received from the EU-IMF mechanism (worth of €65 billion), other loans raised by the Greek government (of about 20 billion), the Greek treasury bills (€15 billion), the Greek sovereign bonds bearing a maturing date after 2020 (€40-45 billion), other liabilities of the Greek State to suppliers, etc. Of course, there will be no contribution for those that did not accept the 21% “haircut” within the PSI of July.
Furthermore, it should be understood that more than 50% of those that have registered in the PSI programme of July, for the specific maturity dates, involves mainly Greek banks, insurance companies and pension funds. So, the whole process concerns mainly the Greek Insurance and Banking sector, for which the Greek State will have to borrow again, in order to make up the losses of an even wider “haircut”.
Thus, we will have the following phenomenon: the Greek government accepts the Greek institutions writing down a greater portion of sovereign debt, leading to deterioration of their reserves or capital adequacy, in order to borrow again by state or international organizations for the recapitalisation of the banks and the state pension funds, with profound political and economic consequences.
The outcome of all this is a great damage being made to the country internationally, the exercise of even more political pressure, the risk of contamination for the entire European financial sector, as is supported by the European Central Bank, and of course a continued depreciation of the Greek Stock Market, which has already suffered billions of losses due to this discussion.