European stocks opened up on Wednesday as markets appear to be pricing in a positive outcome to the Greek debt swap. The bailout package has to be agreed by Greece and approved by the eurozone, European Central Bank and International Monetary Fund before February 15.
The European Central Bank has also agreed to make key concessions over its holdings of Greek bonds that it purchased in the secondary market last year that will contribute to a reduction of the country's debt burden.
Richard Gibbs, global head, Macquarie Securities tells CNBC-TV18 that with the ECB prepared to actually participate in the Greek private debt holders swap, it would eliminate another 11 billion euro of that debt. Below is an edited transcript. Watch the accompanying video for more. Q: What are you expecting to hear today? What outcome would be taken as a positive by the market and what would be taken as a negative according to you?
A: It looks as if things will be closer tomorrow because the Greek Prime Minister is now going back to members of the supporting coalitions to discussion the terms and conditions of the bailout. We do need to get a resolution by February 15 to meet the refunding requirement on March 20. It does look as if the terms have become even more favourable now with the report we are getting saying that the ECB is prepared to actually participate in that private debt holders swap owing to Greek debt which would eliminate another 11 billion euro of that debt. Of course, the whole debt swap that they are talking about would actually slice a 100 billion euro of Greek debt. Q: What kind of a bump up are you expecting it to be for global markets? Do you think there would be a kneejerk reaction on the upside or do you think because of implementation hurdles and other headwinds the market would not be too gung-ho?
A: I expect there will be a rally and a bump-up on the actual announcement of the resolution in that sense, mainly because it will free up more capital and the liquidity that is still being domiciled with fears of this sovereign debt contagion in the Euro area in particular. As we see that release, we will see more of that liquidity flowing and it
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