26th Oct 2016

Report: Troika considering second debt restructuring for Greece

  • (Photo: Wayne Lam (Ramius))

The troika of international lenders is considering a second debt restructuring for Greece, according to Financial Times Deutschland.

"There is such a discussion," a senior official told the paper.

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The discussion reportedly revolves around writing off Greece's first bailout of €110bn dating back to 2010, when eurozone states, the European Central Bank and the International Monetary Fund cobbled together a bailout via bilateral loans.

But neither the IMF or the ECB is willing to take any losses, putting the whole burden on eurozone governments, sources told the newspaper.

The IMF always insists on getting its money back in countries they lend to around the world and the ECB considers a debt write-off as direct government funding, which is forbidden under its rules.

If agreed, the debt restructuring would be the second so-called haircut, after banks and investment funds earlier this year agreed to slash €100bn off the country's debt by agreeing to lose 70 percent of the returns on the old Greek bonds they held.

The deal was a first-ever 'private sector involvement' for a eurozone country and a precondition for a further €130bn bailout to be paid mostly by eurozone states and the ECB, with a small contribution from the IMF as well.

A second haircut is also floated as a likely scenario by the head of Commerzbank, one of Germany's biggest private lenders.

"We will eventually see another debt haircut on Greece, in which all creditors will have to participate," Martin Blessing said at a conference in Frankfurt on Thursday (20 September).

Meanwhile, in Athens, the government is struggling to implement €11.5bn worth of spending cuts which are needed for the next tranche of the bailout to be disbursed. One measure they reportedly agreed on early Friday morning is to raise the retirement age to 67 years, Reuters reported.

Experts from the troika (ECB, IMF and EU commission) are currently in Athens trying to fill the funding gap that emerged from a worse-than-expected recession and months of political quarrels, including two consecutive general elections.

A senior EU official told this paper last week that the troika will in the end "fudge" the report so that no third bailout is required.


Europe ready to tackle Greek debt relief

The Greek government has built and broadened alliances in EU institutions and member-states that acknowledge the need to restructure the debt and deliver another economic model for the eurozone.

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