Greece's three biggest banks said Friday they would participate in a large bond buyback scheme that aims to chip away at the crisis-hit country's debt load and ensure it continues to get its international bailout loans.
The announcements by National Bank of Greece, Eurobank and Alpha Bank came hours before the deadline for private-sector holders of Greek sovereign bonds to join the scheme, under which they would sell back their devalued Greek debt holdings to the government.
Two smaller domestic lenders also said they would participate.
Finance ministry officials said after the deadline ended that they would have a clear picture of bondholders' response on Saturday, and an announcement is expected over the weekend.
The government has said it will spend about €10 billion ($13 billion) in European funds on the buyback, offering between 30 and 40 percent of the bonds' face value. Because the paper was trading at even lower prices than that on the secondary bond market, Athens hopes investors — many of whom bought the bonds at less than half that price during the height of the crisis — will leap to the offer.
Financial markets reacted positively to the news, with the main stock index in Athens rising 1.1 percent, better than its European counterparts.
A debt buyback would allow Greece to get its hands on about half its bonds held by private investors, which have a total face value of some €63 billion ($81 billion). About a quarter of these bonds belong to domestic lenders. Greek pension funds hold a further €8 billion but are not participating, while an estimated €15-25 billion is owned by international hedge funds.
The government has said that success is of vital importance, but indicated that it has a backup plan if the buyback fails.
Greece is in the grip of a vicious financial crisis, born of decades of overspending and poor fiscal management. The country is heading into a sixth year of a deep recession, expected to reach a cumulative 25 percent by the end of 2013.
The bond buyback is part of a complex effort by Greece's bailout creditors to reduce the country's debt to below 110 percent of GDP in ten years' time — from an estimated 190 percent next year.
It will also clear the way for release of €34 billion ($44 billion) next Thursday in critical rescue loans from the International Monetary Fund and the other 16 European Union countries that use the euro.
To pay Greece's bills until then, the state debt management agency said it will seek to raise €3.75 billion ($4.9 billion) in treasury bills next Tuesday. The debt agency said Friday it would auction €2.12 billion in one-month bills — the second time in as many months Greece has resorted to such an unusually short-term issue— and €1.25 billion in six month bills.
Greece has been struggling to reform its economy, introducing repeated rounds of spending cuts and tax hikes in return for its international bailout loans. The austerity measures have outraged workers' unions, who have staged frequent strikes and demonstrations. The country's main public sector union announced a nationwide strike for Dec. 19.
Meanwhile, the statistical authority earlier on Friday revised down its estimate of the economic contraction in the third quarter, to 6.9 percent on the year instead of 7.2 percent announced last month. It explained the revision was due to new data that had not been available last month.