EU postpones its decision to save Greek government bonds

Fresh tension brewed in Europe when the three overseas money lenders (termed ‘troika’) deferred their plan to save Greek government bonds by writing off 50% of its debt. The decision was based on the inability of the Lucas Papademos’s interim government in implementing severe austerity measures in Greece, despite reaching an official agreement. The ‘troika’ included European officials representing the EU (European Union), the ECB (European Central Bank) and the IMF (International Monetary fund). They have cast a serious doubt on Greece’s ability and willingness to come out of debt crisis and may withhold the next aid installment due on March.

The situation further aggravated as negotiations between the Greek PM Lucas Papademos’s interim government and the Institute of International Finance (IIF) held on Friday met dead ends. The IIF that constituted members of private sector investors and banks had been engaged on a series of talks with the government on merits of accepting a “voluntarily” default in exchange for additional International aid. The intention was to force private holders of Greek government bonds to accept losses so as to bring down the country’s debt. But with the IIF officials backing out from absorbing losses, the possibility of uncontrolled Greek default is growing larger and so is its impact on Europe and other global economies.