Brussels, 23/01/2012 (Agence Europe) - Eurozone finance ministers have warned Greece that there will not be a second bailout programme unless the country's private investors agree to dip into their pockets in the form of a write-off of Greek bonds to a sustainable level and unless the Greek government takes the budget and structural measures needed to meet its macroeconomic targets. However, say that Greece's place in the eurozone is secure.
The chair of the Eurogroup, Jean-Claude Juncker, explained in the evening of Monday 23 January that the eurozone ministers called on the Greek government to arrange a deal on private sector involvement over the next few days that complies with the ruling of the 26-27 October 2011 European Council that the country's debt must be reduced from 160% of GDP to 120% by 2020 through a voluntary write-down of the face value of Greek bonds (by exchanging them for new, 30-year bonds - see EUROPE 10483). Greece's international lenders want to ensure the debt is reduced to affordable levels and the second bailout does not exceed the €130 billion of public money that has already been promised, but the bailout will be jeopardised if the private sector fails to contribute as much as expected.
The negotiators are digging in their heels over the question of the interest they will receive on the new 30-year bonds, bonds partially guaranteed by the European bailout fund. Juncker said eurozone ministers wanted the interest rate to be less than 4% and less than 3.5% until 2010, and were demanding that talks kicked off again to consider these rates. He said he did not himself have the full picture of what was going on in the negotiating chambers. Greece's private lenders, represented by the International Institute of Finance, said at the weekend that their latest offer was an interest rate of over 4%, and they would not go any lower under a voluntary deal. Voluntary agreement is vital as far as the eurozone is concerned, in order to prevent a forced default, which would undermine wider financial stability.
The Eurogroup wants the Greek government to agree with the troika of international lenders (the European Commission, the IMF and the ECB) on the details of the second Greek bailout. Juncker warned that further measures would be needed before the deal could be signed, adding that the government was in the process of preparing something along those lines. EU Commissioner for the Euro Olli Rehn said Greece had to speed up the introduction of structural reforms, some of which had to be introduced before the second aid programme could be finalised. Ministers are concerned at delays in implementing agreed reforms despite the new government headed by former central banker Lucas Papademos. Greece is dragging its feet over scaling back the civil service, liberalising protected professions and the privatisation process.
The pressure on Greece has not dented the optimism of Greek Finance Minister Evangelos Venizelos, who issued a press release on Tuesday 24 January saying that Greece had had the go-ahead from the Eurogroup to sign a deal with the private sector over the next few days. The clock is ticking fast, with the deadline of 13 February looming. In March 2012, Greece will have to roll over €15 billion of its debt, which will only be possible if it receives the second bailout package and therefore timely agreement on a write-down of its bonds. The European summit will discuss progress on Monday 30 January. (MB/transl.fl)