Euro cen­tral banks mull rolling over Greek bonds

The Pak Banker - - Front Page -


Eu­ro­zone cen­tral banks may de­cide to roll over their hold­ings of Greek debt to re­duce by €5.6 bil­lion (Dh26.6 bil­lion) the amount gov­ern­ments will need to pro­vide Athens by 2016, ac­cord­ing to a doc­u­ment ob­tained by me­dia on Thurs­day.

Such a move would cut the amount to €2 bil­lion from €7.6 bil­lion, the doc­u­ment, which emerged from this week’s Eu­ro­zone fi­nance min­is­ter’s meet­ing, showed.

In­ter­na­tional lenders — Eu­ro­zone coun­tries, the Euro­pean Cen­tral Bank and the In­ter­na­tional Mon­e­tary Fund — agreed early on Tues­day on a debt re­duc­tion plan for Athens that would bring Greek debt to 110 per­cent of GDP in 2022.

This would be down from al­most 190 per cent ex­pected for next year. Ac­cord­ing to the doc­u­ment, Greece would need to get €1.8 bil­lion in ex­tra fi­nanc­ing in 2012-2014 and an­other €5.8 bil­lion be­tween 2015 and 2016 — a to­tal of €7.6 bil­lion. But it floated the idea that if the Eu­ro­zone’s 17 na­tional cen­tral banks, which to­gether form the Eurosys­tem, de­cide to re­place the Greek bonds they hold with new Greek pa­per as the debt ma­tures, it would save Greece the need to re­deem €3.7 bil­lion in 20122014 and €1.9 bil­lion in 2015-2016.

It lists the item of “roll-over of ANFA hold­ings” — a term to de­scribe cen­tral banks’ in­vest­ment port­fo­lios — in paren­the­sis, sug­gest­ing it has yet to be agreed or in any way for­malised.

Fur­ther­more, it notes that the amounts men­tioned are ten­ta­tive and sub­ject to ap­proval by na­tional cen­tral banks.

There is no pub­lic data on the amounts of Greek debt held by in­di­vid­ual Eu­ro­zone cen­tral banks.

The roll-over idea is sep­a­rate from the is­sue of the Euro­pean Cen­tral Bank re­turn­ing prof­its to Athens from the Greek bond port­fo­lio it has ac­quired un­der its Se­cu­ri­ties Mar­ket Pro­gramme (SMP).

That will re­duce the fi­nanc­ing needs of Greece by €4.1 bil­lion eu­ros in 2012-2014 and an­other €3 bil­lion in 2015-2016.

This re­turn of prof­its — along with cut­ting in­ter­est on Eu­ro­zone loans to Greece, a de­fer­ral of in­ter­est pay­ments, ma­tu­ri­ties ex­ten­sion, and sev­eral other mea­sures — al­lowed the Eu­ro­zone to cut the amount of new money it would have to lend to Greece to €7.6 bil­lion from €32 bil­lion.

A roll- over of the Greek bonds in in­vest­ment port­fo­lios of cen­tral banks would in­crease the over­all Greek pub­lic debt by 0.1 per cent of GDP in 2020 and 2022.

But this would be off­set by new debt re­lief mea­sures pen­cilled in by in­ter­na­tional lenders for the coming years that would cut Greek debt by 2.7 per cent of GDP by 2020 and 5.1 per cent of GDP by 2022, the doc­u­ment said.

This new debt re­lief could hap­pen once Greece reaches a pri­mary sur­plus — a pos­i­tive bud­get bal­ance be­fore ser­vic­ing debt — and if Greek re­forms are on track, Eu­ro­zone fi­nance min­is­ters de­cided on Tues­day.

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