Brussels, 10/06/2011 (Agence Europe) - On Friday 10 June 2011, the German parliament (Bundestag) passed a non-binding resolution in favour of the second Greek bailout as long as Greece's private creditors bear some of the financial burden. German Finance Minister Wolfgang Schäuble told the Bundestag that “private sector involvement in the bailout would be inevitable if there are any doubts about Greece's ability to pay back its debt and if more time is to be granted by a new aid plan”.
Everything hinges on getting the private sector informed. Germany, France and the ECB agree that such involvement would have to be voluntary and not lead to a de facto default. Germany suggests extending the maturity on existing Greek bonds to seven years, but credit rating agencies would see this as a default. The ECB likes the idea of bond holders buying back their bonds (when they mature) at the interest rate and maturity for which they initially bought them (see EUROPE 10395).
“We are examining the feasibility of voluntary debt re-scheduling or re-profiling, of course on the condition, extremely important, that this would not create a credit event”, said a spokesperson for EU Economic and Monetary Affairs Commissioner Olli Rehn, meaning any event that would lead to a writing down of the value of Greek bonds. "We are examining ways in which private bondholders, on a voluntary basis, would agree to maintain their exposures. But of course, depending on the operations that you take, market participants, in all their variety, can consider that this is in some way something that is like, or is, effectively a credit event, which is what we have wanted to avoid from the very beginning," added the spokesperson, saying that the ECOFIN Council would meet for lunch in Brussels on 14 June 2011 to discuss legislation to boost economic governance in Europe. They will obviously also discuss the situation in Greece. (M.B./transl.fl)