Brussels, 30/11/2012 (Agence Europe) - Eurozone finance ministers will be able to relax a little at their Eurogroup meeting on Monday 3 December after three tense meetings into the early hours of the morning over the past fortnight on the second Greek bailout. Attention on Monday will focus on the bailout of Cyprus.
The Cypriot problem is sustainability of the country's public debt, particularly after the country gets conditional financial aid from the troika (the European Commission, the European Central Bank and the IMF). In the Commission's Autumn Economic Forecasts, Cyprus' debt will reach 89.7% of GDP this year and 96.7% in 2013. Figures circulating in the press suggest that financial aid of some €17 billion (100% of Cypriot GDP) will be required over a three-year period, which would raise the country's debt to 200% of GDP, which the IMF says is unsustainable. Hence the current talks on restructuring the Cypriot debt. A European source admitted that given the scale of the sums involved, there are differing views of the situation. A high-ranking European official added that the deterioration of the sustainability of Cypriot debt was a highly important aspect of the problem and the size of the aid programme would critically depend on the bank audit, which is being carried out by the PIMCO company and is expected to be unveiled at the end of next week. Progress on Cyprus will be reasonably rapid, he said, but not immediate and political agreement is not expected on Monday.
Greece. The ministers will be briefed on the conditions and timing of the buyback of Greek bonds still in private hands. The Council of Ministers refuses to comment on what exactly would be viewed as a successful buyback, wanting to keep hands free for further action in the event of failing to bring Greek debt back to a sustainable path as defined by the last Eurogroup meeting, namely 190% of GDP in 2014, 175% in 2016, 124% in 2020 and 110% in 2022). The final deadline for formally deciding to disburse the latest aid instalment (some €44 billion) has been set for Thursday 13 December, the first day of the European Summit.
A related question to be settled is the granting to Ireland and Portugal of the interest rate reduction in existing loans that has been granted to Greece. The European source says there is no reason to believe that this will be granted because while they are in receipt of aid, Ireland and Portugal have been allowed to keep profits on Greek bonds held by their central banks.
On Friday 30 November, the Bundestag gave the go-ahead for the payment of the new instalment of aid. With support from the Social Democrat opposition and the Greens, the German government won a comfortable majority although Chancellor Angela Merkel did not get an absolute majority with votes from the parties in the coalition government.
Spain. The European Commission will brief Eurogroup about the current recapitalisation of the nationalised Spanish banks (BFA/Bankia, NCG Banco, Catalunya Banc and Banco de Valencia). There are no political obstacles and the aid from the European Stability Mechansim (ESM) for the Spanish bank bailout fund FROB will take place in the next few days. (MB/transl.fl)