Brussels, 23/01/2012 (Agence Europe) - Negotiations on the participation of the private sector in the second rescue programme for Greece are continuing in the hope of reaching an agreement between Athens and its private creditors between now and the European Council of Monday 30 January. Our cooperation with the private sector is “highly constructive” and we are hopeful of “finalising the procedure in time”, said the Greek finance minister, Evángelos Venizélos, on his arrival for the meeting of the Eurogroup on Monday 23 January. “Today, we will take stock of our discussions on the involvement of the private sector concerning Greece”, said the commissioner in charge of the euro, Olli Rehn. He voiced his hopes that the negotiations could be concluded “this week”.
The Institute of International Finance (IIF), which represents a majority of owners of Greek private bonds, is believed to have put in a final offer to buy Greek debt instruments at around the limit of what corresponds to a voluntary operation of the private sector, according to its executive director Charles Dallara, the Financial Times reports. The institutional creditors, led by the IMF, are seeking reassurances that the partial restructuring of the Greek debt will achieve the objective of bringing this debt from 160% to 120% of Greek GDP between now and 2020. The private creditors have been asked to exchange their medium-term debt instruments for 30 year debt instruments, partly secured by the European rescue fund and offering a “reasonable” interest rate. An agreement on private-sector involvement in the second Greek bailout will pave the way for the finalisation of a public aid envelope of €130 billion. Readers may recall that the “troika” (European Commission, ECB and IMF) is in Athens to make sure that the Greek government sticks to its budgetary and macroeconomic commitments, with the adoption of new austerity measures if required.
After a meeting with his opposite number, Wolfgang Schäuble, on Monday, the French minister for the economy, François Baroin, welcomed the fact that “a voluntary restructuring of the (Greek) debt held by private investors (…) seems to be taking shape”. “We are determined to support Greece as long as necessary to set in place reforms and for these reforms to produce results”, he added. Schäuble, on the other hand, stepped up the pressure on the Greek authorities: “Greece must fulfil its commitments”. On Friday of last week, French President Nicolas Sarkozy adopted the same firm stance. “What has been done in Ireland, Portugal, Spain, Italy, and even in Germany and France, that is what our Greek friends must do. And the longer they leave it, the harder and more painful it will be”, he said, presenting his best wishes to the French diplomatic corps.
Funds. The European finance ministers will try to put the finishing touches to the draft treaty instituting the European Stability Mechanism, which is due to enter into force in July. The firepower of the permanent rescue fund, combined with the remaining capacity of the European Financial Stability Fund (EFSF), will be limited to €500 billion, as Germany requires. Italian Prime Minister Mario Monti is however calling for the firepower of European funds to be doubled to €1000 billion, according to Der Spiegel. The director-general of the IMF, Christine Lagarde, said on Monday that the intervention capacity of the Europeans must be “increased”, but not necessarily doubled.
Danish Economy Minister Margrethe Vestager is hoping for a debate on the recovery of growth as part of the “European semester”. We must intelligently consolidate our public funds, “in other words, prioritise expenditure which is favourable to growth”, she said on the website of the Danish Presidency. She adds: “At the same time, we must take measures and bring in reforms capable of stimulating growth and generating new jobs”. The Eurogroup will look in closer detail of the cases of Italy and Spain, countries which Rehn describes as having made “considerable progress” on the issue. (MB/transl.fl)