Options mulled to cut Greece's debt
Source: Agencies |
July 18, 2011, Monday
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Print Edition
Print Edition
ALLOWING the EFSF bailout mechanism to buy back bonds from the secondary market would help deal with Europe's debt crisis, European Central Bank Executive Board member Lorenzo Bini Smaghi told a Greek newspaper yesterday.
Eurozone officials are exploring ways to extend a rescue deal for overborrowed Greece and give it more time to repair its public finances. At the same time, authorities are trying to prevent the debt crisis from escalating in the bloc.
One option being looked at is enabling the European Financial Stability Facility to provide funds for buying back bonds from private investors, a move that could help Greece lighten its debt load.
"We have said that a useful option would be for the temporary EFSF mechanism to buy bonds in the secondary market. This option, however, is not included in the design of the EFSF. If there was a way to change this, it would be useful," Bini Smaghi told the To Vima newspaper in an interview.
"This would allow the private sector to sell bonds at market prices, which are currently below nominal value. At the same time, the public sector could benefit monetarily."
Eurozone officials have rattled markets by struggling to reach a deal on how to involve private sector investors in tackling Greece's debt mountain, a key demand of Germany before it signs off on more support for Athens.
"Governments have asked for the private sector's involvement (PSI). We believe that if this takes place it must be voluntary and based on a credible adjustment program by Greece. If there is a PSI it must be designed by governments," Bini Smaghi was quoted as saying in the interview.
He said Greece needs to do in two years what it has not done in 10 to correct its fiscal derailment and regain market trust.
Greece last month passed a five-year austerity package of spending cuts, tax rises and state asset sales to ensure continued funding under a current EU/IMF bailout scheme.
Eurozone officials are exploring ways to extend a rescue deal for overborrowed Greece and give it more time to repair its public finances. At the same time, authorities are trying to prevent the debt crisis from escalating in the bloc.
One option being looked at is enabling the European Financial Stability Facility to provide funds for buying back bonds from private investors, a move that could help Greece lighten its debt load.
"We have said that a useful option would be for the temporary EFSF mechanism to buy bonds in the secondary market. This option, however, is not included in the design of the EFSF. If there was a way to change this, it would be useful," Bini Smaghi told the To Vima newspaper in an interview.
"This would allow the private sector to sell bonds at market prices, which are currently below nominal value. At the same time, the public sector could benefit monetarily."
Eurozone officials have rattled markets by struggling to reach a deal on how to involve private sector investors in tackling Greece's debt mountain, a key demand of Germany before it signs off on more support for Athens.
"Governments have asked for the private sector's involvement (PSI). We believe that if this takes place it must be voluntary and based on a credible adjustment program by Greece. If there is a PSI it must be designed by governments," Bini Smaghi was quoted as saying in the interview.
He said Greece needs to do in two years what it has not done in 10 to correct its fiscal derailment and regain market trust.
Greece last month passed a five-year austerity package of spending cuts, tax rises and state asset sales to ensure continued funding under a current EU/IMF bailout scheme.
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