15th Nov 2019

Greek debt talks stall ahead of Brussels meeting

  • (Photo: danoots)

Eurozone finance ministers are on Monday (23 January) set to discuss the stalling talks between the Greek government and international banks on accepting losses on their Greek bonds - a key condition for Athens to receive a second bail-out.

Top bankers from the Institute of International Finance left Athens on Saturday - after an extra day of talks - without reaching an agreement and were set to continue negotiations over the phone. The sticking point remains the interest rate of the new Greek bonds to be issued after the debt restructuring.

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Sources close to the negotiations told both Reuters and Financial Times Deutschland that bankers are willing to accept a higher real loss than the 50 percent envisaged in October by EU leaders, going up to 65 or 70 percent. But they require an interest rate above four percent - more than the troika of international lenders (the European Commission, the European Central Bank and the International Monetary Fund) are willing to concede.

Without an agreement on the "private sector involvement" in the Greek debt restructuring, finance ministers and EU leaders later this month will not be able to approve a second Greek bail-out worth €130 billion, which would be vital for Athens to be able to repay €14.5 billion in maturing bonds in March.

This would trigger a proper default on its sovereign debt, with severe consequences both for Greece and the eurozone.

German finance minister Wolfgang Schauble said on Sunday on ARD television the crucial factor was that Athens should by 2020 have a sustainable level of borrowing. Asked whether a cut of 70 percent on Greek debt would be sufficient, Schauble said: "It depends on the details. The negotiations are continuing."

He also rejected calls to boost the lending capacity of the eurozone's permanent rescue fund, the European Stability Mechanism, which should come into force this summer with a firepower of €500bn - an amount considered insufficient to rescue big euro economies such as Italy or Spain.

"We are sticking to what was agreed in December. In March we will check whether that is sufficient," Schauble said.

The draft treaty establishing the ESM is also being discussed on Monday by eurozone ministers. But negotiations are stuck due to Finland's opposition to the voting rights within the new fund, which favour big donor countries like Germany.

Non-euro ministers will join their colleagues later in the evening to discuss the latest draft of the fiscal discipline treaty, a text demanded by Germany as a pre-condition for all future eurozone bail-outs.

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