Eu­ro­zone works on Greece op­tions

Ger­many in­sists that tax­pay­ers will loan money only if banks, pri­vate cred­i­tors also take hits

Kathimerini English - - Business & Finance -

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.

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