Brussels, 10/12/2012 (Agence Europe) - On Monday 10 December, the European Commission said that Greece had decided to extend its privately owned bond buy-back until Tuesday lunchtime. Simon O'Connor, spokesman for Euro Commissioner Olli Rehn, said the Commission was confident that there were more national and international bond-holders interested in participating.
The Greek debt management agency, PDMA, announced on Monday that the deadline for private investors in Greek sovereign bonds to take part in the buy-back had been extended from Friday to Monday lunchtime. The first phase ended at 5.00pm on Friday 7 December, with €26.5 billion to buy back bonds at 33.4% of their face value, €3 billion less than the target set by the government. It should be possible for the gap to be met by Greek banks, which still own €17 billion of bonds and which are reported to have offered to sell bonds to the tune of €10 billion. On Friday, the boards of the banks in question were prepared to sell all the Greek bonds in their portfolios.
O'Connor pointed out that “a successful debt buyback is an integral part of the Eurogroup agreement” last month, to put the Greek debt back on track (see EUROPE 10739). The outcome of the buy-back will be examined by the eurozone finance ministers at the Eurogroup meeting on Thursday 13 December, a meeting that should pave the way for disbursement of aid totalling €34.4 billion, €23.8 billion to bail out Greek banks.
Greece hopes the bond buy-back will enable it to cut its public debt by some €20 billion to help it reduce debt as a proportion of GDP to 124% by 2020, as decided in agreement with the International Monetary Fund on 27 November.
To keep its international lenders happy and ensure that further aid of more than €9 billion is forthcoming in 2013, Greece had to introduce a range of further action, including reform of the country's tax system, which is not going down well in the coalition government. In an interview on Friday with Greek newspaper Ekathimerini, Greek finance minister Yannis Stournaras said that around €3 billion of the €13.5 billion Greece has to save in 2013 and 2014 could come from increased tax revenue. Stournaras said the troika of lenders (the European Commission, the European Central Bank and the IMF) “does not accept the argument that we will overcome large tax evasion to achieve these revenues. They say that we can try to achieve this and if we manage it then we can look at relaxing demands. So we've submitted proposals that attempt to simplify the tax scale, to include self-employed professionals and farmers, to increase tax on savings and on cigarettes, all of which should bring in €3 billion. Whether we like it or not, we have to bring in new revenue.” The proposal is to tax annual income of up to €25,000 at 21%, income of between €25,000 and €48,000 by 36% and income of above €48,000 by 45%. In order not to cause problems for people close to one of the cut-off points, the troika suggests taxing income of above €26,000 by 45% along with a tax cut of just under €2,000. (EL/transl.fl)