EU OFFICIALS scrapped plans for a meeting of euro zone finance ministers next Monday to discuss the situation in Greece as anxiety intensifies about the country’s struggle to agree terms for its second international bailout.
Although the ministers’ talks may be rescheduled later next week, the delay comes as Germany and the Netherlands resist any expansion of the €130 billion loan package foreseen in the new EU-International Monetary Fund rescue.
In some accounts, an additional €15 billion may be required to help balance the books. However, the talks have been characterised by confusion over the figures and brinkmanship by the protagonists.
Dutch prime minister Mark Rutte insisted in The Hague yesterday that his administration was “very negative” about writing down or increasing government loans to Greece.
His remarks came one day after German finance minister Wolfgang Schäuble said public lenders saw no need to increase the €130 billion loan plan.
Participants in the talks on Greece say an increase may be required, however, as an anticipated €100 billion contribution to the bailout from Greece’s private bondholders will not be enough to achieve its debt reduction target.
The alternative of a contribution from the European Central Bank has run into resistance within the bank.
The ministers had planned to meet in Brussels to review a deal with private creditors and an acceleration of Greece’s austerity plan. However, Greece has yet to sign up to a policy programme its EU-IMF backers have sought in return for its new loans.
This is crucial, as any imminent debt-restructuring agreement with the Institute of International Finance banking lobby, which represents the biggest Greek bondholders, will be contingent on the government receiving another round of EU-IMF aid.
“There will be no Eurogroup meeting on Monday, February 6th, 2012. A Eurogroup meeting may be scheduled later in the week. If so, media representatives will be informed in due time,” said a statement from Luxembourg’s premier, Jean-Claude Juncker, leader of the ministers’ group.
The delay has potential to complicate a delicate debt-structuring process mooted for the week beginning February 13th, which is part of a complex package of inter-related measures designed to avert a Greek default when big debts fall due in mid-March.
“We’re looking at a phase where the margins are small and the alternatives are fewer. It’s crunch time,” said a diplomat briefed on the talks.
At issue still is whether the ECB contributes to the rescue effort in order to bridge an emerging funding gap in the second plan.
When the talks were initiated in October, the combination of the EU-IMF loan and the debt haircut was supposed to cut Greece’s debt to 120 per cent of gross domestic product by 2020 from 159.1 per cent in the second half of last year.
The latest assessments suggest the debt will drop to between 123 per cent and 127 per cent, suggesting billions of euro will be required to make up the deficit.
However, the ECB is reluctant to make additional aid available by forgoing the profit it stands to make on €55 billion of Greek bonds it holds. These were acquired below face value in ECB market interventions in the last 20 months. The bank may make a big profit if they are redeemed by Greece at face value when due.
