Brussels, 07/10/2015 (Agence Europe) - When making the decision, in February 2012, to protect the Greek debt instruments owned by itself and by the national central banks (NCBs) of the eurozone, notably by carrying out a swap of these instruments for new Greek instruments with the same characteristics (nominal value, interest rate, interest payment date and repayment date), but different numbers, the European Central Bank (ECB) acted only to maintain the stability of the currency market. The damage suffered by private owners of Greek debt instruments resulting from a haircut of their instruments by more than 50% decided upon under Private sector involvment (PSI) (see, amongst others, EUROPE 10483), cannot be attributed to the ECB, but to economic risks normally inherent to activities of the financial sector.
This is the essence of the judgment returned on Wednesday 7 October by the General Court of the EU (case T-79/13), in which it rejected the claim brought by more than 200 private owners (mostly Italian). These investors sought compensation from the ECB for damages for a total amount of €12 million they suffered following the 53.5% haircut of their debt instruments as a result of their forcible participation in the PSI (a mass swap of Greek debt instruments for 'haircut' instruments, by way of private sector involvement in the restructuring of the Greek debt).
The plaintiffs accuse the ECB of violating the principles of legitimate trust of private owners, legal security and equality of treatment. Amongst other things, they accuse the Bank of: - having on several occasions opposed a restructuring of the Greek public debt and a selective payment default on the part of Greece; - having avoided the PSI mechanism and the resulting haircut through the debt swap operation for itself and the national central banks (see above); - on this basis, having granted a buy-back programme for Greek debt instruments only to the national central banks, even though these instruments did not meet the credit quality conditions; - by means of these measures, having retained for itself the status of priority creditor, to the detriment of the private sector. The plaintiffs argue that without this position of priority creditor and without the buy-back programme granted to the national central banks alone, the value of the private instruments would never have depreciated as much as it did.
The General Court rejected these objections, as it found that private investors cannot rely on the principle of the protection of legitimate trust and legal security in a field of monetary policy which features constant adaptation, on the basis of the variations of the economic situation. The judges found that private investors could not exclude the risk of a restructuring of the Greek public debt, due to the highly unstable economic situation of the country and the differences of opinion on this subject within the eurozone and the institutions involved (Commission, IMF and ECB).
Similarly, the judges concluded, the private creditors cannot invoke the principle of equality of treatment with the ECB and the national central banks, as their respective situations are not comparable: the ECB pursues objectives of public interest (stability of prices and proper management of the monetary policy), whilst private savers pursue the objective of the highest possible return on their investment. They stated that the damage suffered by the plaintiffs in this case corresponds to the normal economic risks related to transactions on debt instruments issued by states. (Original version in French by Francesco Gariazzo)