Brussels, 24/02/2012 (Agence Europe) - The German finance minister, Wolfgang Schäuble, is not convinced that the second financial bailout of Greece, which has only just been tied-up by the Eurogroup, will allow the country to take back control of its debt and get back on the road to growth (see EUROPE 10558). “We cannot say with any certainty that the path chosen will be successful. It is also possible that this will not be the last time that the German parliament will have to look at financial aid to Greece”, he wrote in a letter to German MPs, as revealed by Reuters. Nonetheless, the minister calls on the Bundestag to give its blessing to the Greek programme on Monday 27 January. Before the European Council on Thursday 1 March, the Eurogroup will meet to take stock of the implementation of the priority measures required of Greece and the financial operation underway to partially restructure Greek debt.
The Greek authorities are pulling out all the stops to comply with their commitments. Greece is making a “Herculean effort” to finalise its decisions on the participation of the financial sector in the restructuring of the public debt and the conditions for the loan to be granted to Greece, said Greek Prime Minister Lucas Papademos, as reported by AFP. He added: “the legislative procedure is satisfactory, but there are still some outstanding questions”. On Friday 24 February, Athens was to officially launch the procedure for the trade in debt instruments held by its private creditors. These instruments will be subject to a more severe haircut than anticipated (53.5% instead of the European Commission's objective of 50%). Combined with the public sector contribution, the participation of the private sector should help to bring the Greek debt down from 164% of Greek GDP to 120.5%.
Private investors volunteering for the debt exchange will have until 9 March to apply. “The operation itself is set to take place by 12 March for Greek debt instruments and by 5 and 6 April for those under English and Japanese law”, said Finance Minister Evangelos Venizelos. If the participation of the public sector is too low, Greece has brought provisions into its legislation making it possible to oblige reluctant private creditors to take part in the restructuring of its public debt. But if Athens makes use of these clauses, there is a risk that the operation will no longer be to continue on a voluntary basis. However, the Europeans have always wanted to avoid a process of this kind, the consequences of which on financial stability are impossible to predict. The operation must be concluded by 20 March, the deadline for €15 billion on the Greek debt to be honoured.
Early next week, the Greek parliament will adopt two sensitive bills as a matter of urgency, one bringing in cuts in salaries and pensions and the other reforming the health sector by merging hospitals and reducing pharmaceutical expenditure. (MB/transl.fl)