Ber­lin, Paris see eye to eye on Greece

Merkel, Sarkozy unite be­hind idea of fur­ther help be­ing pro­vided, back Vi­enna Ini­tia­tive as a ba­sis

Kathimerini English - - Business & Finance -

Ger­man Chan­cel­lor An­gela Merkel and French Pres­i­dent Ni­co­las Sarkozy have united be­hind the idea of pro­vid­ing fur­ther as­sis­tance to Greece and that pri­vate in­vestors should par­tic­i­pate in the scheme on a vol­un­tary ba­sis.

The two lead­ers said at a joint news con­fer­ence yes­ter­day that the pri­vate sec­tor par­tic­i­pa­tion could hap­pen on the ba­sis of the so­called Vi­enna Ini­tia­tive.

Merkel said this ap­proach, based on the 2009 agree­ment by banks to main­tain their ex­po­sure to debt in Cen­tral Europe at the height of the fi­nan­cial cri­sis, was a “good foun­da­tion” for a Greek deal and dis­pelled ru­mors ear­lier this week that Ger­many wanted to wait un­til Septem­ber be­fore mak­ing a de­ci­sion.

“The Vi­enna Ini­tia­tive... is a good foun­da­tion and I be­lieve that we can move for­ward on this ba­sis,” she said.

Her back­ing of the Vi­enna so­lu­tion rep­re­sented a shift for Ber­lin, which ear­lier this month had said in a letter to its eu­ro­zone part­ners that they wanted a more far-reach­ing bond swap to en­sure fair bur­den-shar­ing from the banks that hold Greek sov­er­eign debt.

“We have to move for­ward on this now and I think it makes sense to in­volve the pri­vate sec­tor. This is im­por­tant for us,” she said.

Sarkozy listed four cri­te­ria that must be met to en­sure a role for the pri­vate sec­tor, in­clud­ing that it be vol­un­tary, avoid cre­at­ing a “credit event,” have the back­ing of the Euro­pean Cen­tral Bank and be sealed rapidly.

“We want to go as quickly as pos­si­ble with­out fix­ing a date,” Sarkozy said. “Since Septem­ber is not as quickly as pos­si­ble and we may have other con­cerns in Au­gust and we are in the sec­ond half of June, you see what I mean.”

The cost of in­sur­ing Greek debt fell af­ter the Ger­man chan­cel­lor with­drew her de­mand that bond­hold­ers be forced to shoul­der a “sub­stan­tial” bur­den in a res­cue.

Credit de­fault swaps on Greece were at 1,895 ba­sis points, hav­ing risen as high as 2,237 ba­sis points on Thurs­day, ac­cord­ing to CMA. The Markit iTraxx SovX West­ern Europe In­dex of swaps on 15 gov­ern­ments tum­bled 14.5 ba­sis points to 220.5 ba­sis points.

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