Brussels, 27/06/2011 (Agence Europe) - The public and private creditors of Greece considered various ways of getting the private creditors to contribute “voluntarily” towards the costs of the second bailout for Greece, in Rome on Monday 27 June at a meeting of the Institute of International Finance (IIF). “Several options” are being looked into as part of decentralised discussions between the national authorities and the private sector, said the spokesperson to Economic and Monetary Affairs Commissioner Olli Rehn, who confirmed that the European Commission was attending this meeting at a technical level. The talks will also be used to pin down the level of exposure of the private sector, largely German and French financial institutions, to the Greek sovereign debt.
The European Council adopted the declaration of the Eurogroup that a second aid plan for Greece is necessary and will involve the private sector “in the form of the voluntary and informal refinancing of the existing Greek debt once it reaches maturity” (“roll over” principle) whilst avoiding the country's default, even a partial one (EUROPE 10405).
In agreement with their national supervisor, the French banks have suggested reinvesting 70% of the reimbursements of the Greek sovereign debt, according to Le Figaro. Half would be reinvested in the debt with a 30-year maturity, the rest in an interest-bearing fund. In Spain and Germany, refinancing with shorter maturity, around five years, has been discussed. Not wishing to get into the details of the terms and conditions of the private sector's involvement, Rehn's spokesperson did not confirm that a single option would be decided upon and then applied throughout the EU in order to distort competition distortions between private creditors. Given the amounts of money at stake, the private sector's involvement will inevitably be “substantial”. This involvement may reach a level of €30 billion, out of total aid of around 110 billion.
This week will be crucial for the immediate future of Greece and the eurozone. This Tuesday, the Greek Parliament is starting the debate on the budgetary strategy 2001-2014 of George Papandreou's government and the additional austerity measures called for by the institutional creditors in exchange for the disbursement of a tranche of aid of €12 billion and the finalisation of the second financial rescue. The Greek MPs will vote this Tuesday on the strategy to consolidate public finances which aims, by making savings of €28 billion, to bring the public deficit down from 10.5% in 2010 to below 3% by 2014. They will vote by Thursday on the content of the recommended measures which were finalised on Friday.
Greek Finance Minister Evángelos Venizélos managed to make a few changes to the fiscal plank, further to an agreement with the troika (EU, ECB, IMF), the Commission has confirmed in a press release. Under these, the threshold for income tax will drop from €12,000 to €8000, but will not apply to those aged below 30 or over 65 who earn less than the current threshold. This lifeline for the vulnerable categories will be offset by the creation of an exceptional solidarity tax of between 1% and 5% to be applied progressively to the highest earners, and an annual tax of around €300 for professionals and the self-employed. If the two texts were thrown out, Greece's membership of the eurozone would be jeopardised, Venizélos warned. It could send the country to the wall by mid-July. The Eurogroup will meet on Sunday 3 July to take stock of the situation in Greece. (M.B./transl.fl)