Brussels, 03/12/12 (Agence Europe) - As we went to press, eurozone finance ministers were meeting to discuss the situation in Greece and Cyprus and examine the Greek debt buy-back scheme that was started that same day by the Greek debt management agency, PDMA, in line with the decisions by Eurogroup at its meeting on 27 November (see EUROPE 10739). A successful buyback to reduce the country's debt by some €20 billion (11% of GDP) is a condition for the granting of the next instalment of aid (€34.4 billion), hopefully at the 13 and 14 December European Summit in Brussels. French economy minister Pierre Moscovici said in a debate at the European Parliament that speedy work would be needed to facilitate decision-making at the summit.
On Monday, the European Commission refused to comment on the buy-back, awaiting its outcome on Friday. PDMA said on Monday that private investors would have until Friday 7 December to participate in the programme (some €50 billion to €60 billion of Greek bonds are still in private hands). The government will offer to buy back €10 billion of its bonds from private investors for between 32% and 40% of their face value. Investors will be paid in six-month bonds from the European Union's EFSF rescue fund. This will write down the value of the bonds, like the previous write-down in the spring of last year which reduced the country's debt by €107 billion. The bond buy-back covers bonds due to mature between 2023 and 2042 for a total of more than €62 billion. The aim set by Eurogroup last Tuesday is to reduce Greece's debt/GDP ratio to 124% of GDP in 2020.
A new Eurogroup meeting to discuss Cyprus? It seemed clear on Monday that no decision would be made about the financial bailout requested by Cyprus in June, with the Dutch finance minister describing Monday's meeting as a “basic eurozone meeting.” Cyprus hopes agreement will be reached by the end of the year, with a close source saying that another Eurogroup meeting might be held on Wednesday 12 December once Cypriot bank recapitalisation needs have been quantified by PIMCO on or around 8 December. On Monday, the Financial Times published a draft agreement between Cyprus and its lenders specifying €10 billion just to bail out the country's banks (in other words more than half Cypriot GDP).
Spain. The eurozone finance ministers will be examining Spain's request, lodged on Monday, for €39.5 billion of financial aid for its banks. Last Wednesday, the Commission gave the go-ahead last Wednesday to the restructuring plans of four struggling Spanish banks (see EUROPE 10740). (EL/transl.fl)