Euro central banks mull rolling over Greek bonds

BRUSSELS

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.