Eurozone works on Greece options
Germany insists that taxpayers will loan money only if banks, private creditors also take hits
Eurozone ministers met yesterday in an effort to resolve a dilemma over how to twist banks’ arms into “voluntarily” contributing to a second Greece bailout and avoid a damaging debt default.
The latest attempt to rescue Greece’s finances hinges on to what extent banks, pension funds and insurers can be forced to accept new terms on old debts before getting their money back from Athens.
German Finance Minister Wolfgang Schaeuble insisted, however, that taxpayers in the eurozone’s biggest economy will loan Greece more money but only if the banks and other private creditors take their own hits too.
“The German government is ready to participate in supplementary measures,” Schaeuble said yesterday, but in that, “of course, a role for the private sector is an element... We are in discussions.”
Echoing this hardline stance, his Austrian counterpart Maria Fekter said, “We can’t leave the profits in the hands of the banks and the loss- es in the hands of taxpayers.”
Striking to the heart of the matter, she added, “I’m having a hard time imagining that this can be done on a [purely] voluntary basis.”
The politicians want the banks – some of whom were previously bailed out by taxpayers – to contribute to a second Greek bailout so as to appease voters who think Athens has been wasteful and got off too lightly.
Dutch Finance Minister Jan Kees de Jager said yesterday that the private sector should contribute 20 to 30 percent of any new financing for Greece.
Meanwhile, Greek government bonds slumped after Standard & Poor’s gave the country the world’s lowest credit rating amid speculation it’s moving closer to a default.
The losses pushed the extra yield, or spread, that investors demand to hold the country’s 10-year bonds instead of similar maturity German bunds to a record.
The Greek two-year yield increased 15 basis points to 26.29 percent. The 10-year yield rose for a sixth day, increasing 40 basis points to 17.37 percent.
The spread between Greek 10year bonds and benchmark German debt widened to 1,446 basis points, the most since the euro was introduced in 1999. Costs to insure Greek, Irish and Portuguese debt against default reached all-time highs yesterday, according to traders of credit default swaps. Greece climbed 12 basis points to 1,622 basis points, Ireland increased 3 to 743 and Portugal was 5 higher at 767, according to CMA.