Brussels, 14/06/2011 (Agence Europe) - On Tuesday 14 June, the 17 finance ministers of the eurozone met to take stock of discussions on a second financial rescue of Greece, ahead of an informal dinner of the Ecofin Council on the legislative package to reinforce economic governance in Europe. The aim of this meeting was to define the outlines of a rescue, which would exceed €170 billion, with a view to a definitive agreement at the forthcoming meeting of the Eurogroup on Monday 20 June or, at the latest, the European Council of Thursday 23 and Friday 24 June.
“All the options” on the table will be considered, said the president of the Eurogroup, Jean-Claude Juncker, on his arrival in Brussels. According to the Belgian finance minister, Didier Reynders, three elements must be taken into account to find a solution to the Greek problem: - check that the Greek plan has been correctly put together, particularly in terms of its “privatisations”; - continue to support Greece financially; - convince the private sector, “banks, pension funds, insurance companies”, to maintain their exposure in Greece voluntarily. Any solution going against the ECB would make “no sense”, he added. According to the Financial Times, the envelope of €172 billion for Greece would break down as follows: €57 billion would come from the current rescue plan, €30 billion from the privatisation programme, with the remainder to be footed by the international creditors and the private sector.
The involvement of the private sector, which will be voluntary and not lead to even a partial default on Greece's part, to bear part of the financial burden, is noted. It will all depend on the terms of this involvement. Germany, supported by the AAA-rated countries (Austria, Finland, Luxembourg, the Netherlands) except France, is pleading for a seven-year extension of the maturity of the Greek debt instruments. According to the ratings agencies, however, this option would constitute a default.
The ECB is in favour of holders buying back the bonds they hold, under the same conditions and once these instruments reach maturity (“rollover” principle). Having acquired billions of euros' worth of Greek bonds, it fears a “credit event” which would close the doors to its cash resources to the Greek banks, cause problems for the European banks and trigger the payment of insurance premiums against the default of the Greek debt. This warning was relayed by the governor of Banca d'Italia, Mario Draghi, to the European Parliament on Tuesday. On Sunday, the president of the Bundesbank, Jens Weidmann, reminded Athens that the financial aid granted came with conditions. “If these commitments are not honoured, there will no longer be any basis to pay any additional aid. Greece will have made this choice and will have to take the inevitably dramatic consequences of a default on payment”, he told the newspaper Welt am Sonntag, but stressed that even in this scenario, the euro would remain “stable”.
The ratings agency Standard & Poor's has lowered the rating of the Greek debt to CCC, placing it into the “extremely speculative” category just two notches above default. Under these criteria, Greece is now the country with the lowest rating. Athens has once again spoken out against a decision made on the basis of “rumours” and which ignore the “determined efforts” of the country to avoid default. Germany's Martin Schulz, the chair of the S&D Group that the EP, has described as “absurd” the situation in which the ratings agencies, which he argues are responsible for the financial crisis, decide on Greece's future. (M.B./transl.fl)