Strasbourg, 08/06/2011 (Agence Europe) - German Finance Minister Wolfgang Schäuble calls for a fair sharing of the financial burden among taxpayer and private investors in the new bailout for Greece in a letter sent on Monday 6 June 2011 to the other eurozone finance ministers, the European Central Bank (ECB), the European Commission and the International Monetary Fund (IMF), leaked to the German media (see EUROPE 10392). He says that any agreement on the issue at the Eurogroup meeting on Monday 20 June 2011 should lead to a substantial, quantified contribution by holders of Greek bonds, and the best way to achieve this would be to exchange bonds to increase the maturity of Greek bonds in circulation to seven years, which would give Greece time to fully introduce the necessary reforms and be able to win back trust on the money markets. Greece's national debt is around 150% of its GDP, creating a real risk of default if it does not receive the fifth tranche of aid, €12 billion, which is part of its austerity programme.
Would the idea mooted by Germany decrease the face value of Greek bonds and would that be a de facto partial default? The ECB has warned of such a danger, which could have unforeseen consequences for the Greek banking system, which is having cash-flow problems already, and could also have a domino effect on other European banks, particularly in Germany and France, which hold Greek bonds. The ECB prefers the idea of holders of Greek bonds voluntarily buying up new bonds for the same maturity and conditions when their current bonds expire, rolling over their bonds. Some €65 billion of Greek bonds will mature by 2013. The big credit rating agencies might see the German idea as a default and generate shock waves on the money markets.
A spokesperson for the French government, François Baroin, said on Wednesday 8 June that France opposed the idea of any restructuration of Greece's debt, however it is formulated. EU finance ministers may meet on Tuesday 14 June to discuss economic governance and the situation in Greece.
Pressure. Europeans are still pressurising Greek politicians to get them to agree to the new austerity measures planned in Greece. In a meeting on Wednesday with Antonis Samaras, the leader of the main opposition party in Greece, Nea Dimokratia, the presidents of the European Commission, Barroso, and the European Council, Van Rompuy, pressed home the point that political consensus is needed in Greece to deal with the challenges facing the country. In a press release, Van Rompuy said he had urged Samaras to be cooperative.
The socialist Greek prime minister, George Papandreou, is thinking of holding a referendum on the new austerity programme if the parliament does not back it by the end of the month by a comfortable majority. A fringe of parliamentarians from his own party is calling for a debate on the planned measures, particularly about the privatisation programme expected to make €EUR 50 billion by 2015. Demonstrations are continuing in Greece and the third general strike of the year is due to take place on Wednesday 15 June. (M.B./transl.fl)