Greece’s blue­print to plug fund­ing gap

Athens will try to per­suade cred­i­tors on use of ex­cess bank re­cap funds and on lim­ited bond is­sue

Kathimerini English - - Front Page - BY VAS­SILIS ZIRAS

While Greek bond in­ter­est rates have dropped be­low 8 per­cent, the tug of war be­tween Athens and its cred­i­tors is rag­ing over the coun­try’s re­turn to the mar­kets and the use of the ex­cess funds set aside for the bank re­cap­i­tal­iza­tion, as the gov­ern­ment is try­ing to avoid a third bailout agree­ment.

The ab­sence of an agree­ment on the un­used bank re­cap funds has re­sulted in the post­pone­ment of the an­nounce­ment of the bank stress test re­sults. That was orig­i­nally sched­uled for end-De­cem­ber, but has now been put off by a month un­til a deal is reached.

The gov­ern­ment ex­pects to cover some of the fund­ing gap for 201415 with the money that banks will not need for their re­cap. This is why it it seek­ing the best pos­si­ble terms for the stress tests, in­clud­ing a low­er­ing of the cap­i­tal ad­e­quacy thresh­old (Core Tier I in­dex) from 9 per­cent to 8 per­cent in line with re­quire- ments for bank in the rest of the eu­ro­zone. That will re­duce bank re­cap needs by 2.5 bil­lion eu­ros, while the in­clu­sion of the whole of the de­ferred tax in banks’ cap­i­tal, in­stead of just 20 per­cent, would save another 3 bil­lion eu­ros.

Athens is hop­ing to cover the 201415 fund­ing gap of 14-15 bil­lion eu­ros us­ing 3 bil­lion eu­ros from an in­ter­est rate re­duc­tion for its of­fi­cial sec­tor loans and 4 bil­lion from re­cy­cling the bonds given to banks in 2008, and by tap­ping the un­used bank re­cap funds and the money mar­kets through a lim­ited bond is­sue. By do­ing so, the gov­ern­ment be­lieves it can avoid sign­ing another mem­o­ran­dum with its cred­i­tors.

How­ever, sources close to the ne­go­ti­a­tions say that cred­i­tors, led by the Euro­pean Cen­tral Bank, dis­agree with the use of the ex­cess re­cap funds for any other pur­pose, and are re­ject­ing Greece’s re­quests con­cern­ing the Core Tier I in­dex and the de­ferred tax. In ad­di­tion, the ECB is against re­cy­cling the 2008 bonds. The coun­try’s cred­i­tors are also yet to ap­prove the bill for banks’ new share cap­i­tal in­creases.

Gov­ern­ment of­fi­cials in­ter­pret the cred­i­tors’ at­ti­tude not only as their de­sire to for Greece to re­tain a safety cush­ion in the form of the un­used re­cap funds, but also as a rea­son to pro­long the strict mon­i­tor­ing of the coun­try’s stream­lin­ing process, as il­lus­trated by re­cent state­ments by Ger­man Fi­nance Min­is­ter Wolf­gang Schaeu­ble and SDP of­fi­cials on a new bailout for Athens.

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