Berlin digs in heels on extra €15bn for Greece
03.02.12 @ 09:26
BRUSSELS - Germany has ruled out any extra contribution from national governments or the European Central Bank (ECB) to the second Greek bail-out - as requested by the Greek government. Meanwhile, sources close to the negotiations speak of a €15bn funding gap.
"Greece needs a debt restructuring of 50 percent on the bonds held by private investors. It does not need any supplementary contributions from the public sector," German finance minister Wolfgang Schauble said Thursday on N-TV, a German news channel.
Negotiations on the second Greek bail-out, worth €130 billion, are stuck as private lenders say they will take losses of up to 75 percent on their Greek bonds only if the ECB or national governments also step up their contributions.
According to an EU official quoted by Associated Press, international debt inspectors have discovered a funding gap of €15 billion, which could be filled by more bail-out loans from the eurozone governments or by eurozone central banks or publicly owned banks taking a loss on their Greek bonds.
The ECB and national central banks are estimated to hold €50-55 billion in Greek debt.
Back in Athens, finance minister Evangelor Venizelos on Thursday said that the ECB must take part in the debt restructuring.
"In parallel with negotiations with private creditors, there must be negotiations for the official sector involvement. This means that the ECB must be mobilized, and we must resolve issues pertaining to national central banks," he told socialist party lawmakers, for the first time publicly siding with commercial banks which have been asking for a long time for the ECB to share the burden.
The initial terms of the debt swap Germany still insists on were agreed in October last year and were to see private bondholders voluntarily agree on losing 50 percent of their returns on Greek bonds, in order for Athens to slash its debt burden by €100 billion, or 120 percent of GDP.
But the economic crisis both in and outside the country, as well as a lag in promised reforms, have increased Athens' financing needs, with EU finance commissioner Olli Rehn admitting in the past weeks that the public sector would have to step up its contribution.
Josef Ackerman - the head of Germany's finance giant Deutsche Bank and chairman of the International Institute of Finance (IIF) which groups the commercial banks, hedge funds and other private lenders negotiating the debt swap with the Greek government - said he was confident a deal could be reached "within weeks or even days."
"Everybody has to contribute a little bit, not just the private sector," he told the BBC. He said the IIF is making "a very attractive offer" to Greece of a "net percent value loss of 70 plus percent."
The €-8million-a-year-earning banker noted that "income inequalities are a ticking social bomb" in Europe and said that bankers had a "social responsibility" - describing the latest offer to Greece as "philanthropic."
Despite the IMF itself recognising that further austerity will aggravate the social cost, the Greek government still has to adopt further wage and pension cuts as part of the deal.
On Friday, its technocrat premier Lucas Papademos was set to rally reluctant political leaders from the socialist, conservative and far-right camps behind the unpopular measures.
"They've put a gun to our head and said they will shoot us," George Karatzaferis, the head of the far-right Laos party told Flash radio, referring to the country's lenders.
Athens is under pressure to wrap up the talks before Monday, when eurozone finance ministers are to meet in Brussels to approve the second bail-out deal.
Failure to agree will trigger a disorderly default mid-March when Greece has to repay €14.5 billion worth of bonds - an event that with unpredictable consequnces for the future of the single currency.
Investors are already punishing Portugal with high borrowing costs on its long-term bonds - a signal that it is "the next country in line" according to Ackermann.