ECB to Make Concessions on Greek Debt

Discussion in 'Wall St. News' started by Dogfish, Feb 8, 2012.

  1. Dogfish


    <B>ECB to Make Concessions on Greek Debt</B>
    By STEPHEN FIDLER FEBRUARY 7, 2012, 6:43 P.M. ET

    BRUSSELS—The European Central Bank has made key concessions over its holdings of Greek government bonds that will contribute to a reduction of the country's debt burden, according to people briefed on Greece's ongoing debt-restructuring negotiations.

    The ECB has agreed to exchange the Greek government bonds it purchased in the secondary market last year at a price below face value, provided the debt restructuring talks under way find a successful outcome.

    The ECB won't make a loss on the transaction, but it is not clear whether the bank will exchange the bonds at the below-par price at which it purchased them or whether it will make a profit, these people said.

    The idea is for the ECB, in effect, to exchange the Greek bonds it holds for bonds of the European Financial Stability Facility, the euro zone's temporary bailout fund. The ECB will hold the highly rated EFSF bonds on its balance sheet in place of the Greek bonds it bought as part of its Securities Market Program.

    The EFSF will not hold the Greek bonds on its balance sheet, but will return the bonds to Greece and Greece will then agree to repay the EFSF for the purchase price of the bonds.

    The arrangement could reduce Greece's debt by as much as €11 billion, euro-zone officials estimate—the difference between the ECB purchase price of the bonds and their face value—though the actual reduction could be smaller. An expected accord that now appears close to conclusion would reduce debt to private bondholders by an estimated €100 billion, provided there is a large take-up of the offer by private creditors.

    However, the people briefed on the negotiations said that national central banks of the euro zone-estimated to hold in their investment portfolios some €12 billion in Greek bonds-will not participate in any debt reduction exercise, implying they will insist on being paid in full.

    The ECB has, until now, resisted participation in what has been called "official-sector involvement"—official contributions to easing Greece's debt burden—because it has been worried about setting a precedent, analysts said.

    Under its Securities Market Program, the ECB has purchased €219.2 billion of bonds, also including government bonds of Portugal, Ireland, Spain and Italy.

    Its way to making the concession has been eased because pressure on the ECB from governments and financial markets to make further purchases has lifted considerably since the rally in government-bond markets after the ECB offered three-year funds to banks in December, the analysts said.

    Meanwhile, a German proposal for Greece's bailout loans to be paid first into an escrow account that will pay interest to creditors before being directed to the Greek budget has gained support among other official creditors-but Greece has yet to agree the idea, these people said.

    "The escrow account is an indirect oversight of Greece by Germany," said Greek opposition leader Antonis Samaras. "I have a problem with that."
  2. Salmon


    Germany try to dominate in Europe, they try to implement servitude in rest of Europe, SHORT EURO, kill German weak economy !!!
  3. Dogfish


    The German economy is very strong, unemployment is record lowest since 1991 last month, if you sell the euro you will boost their ability to export manufactured goods which is a main driver of their economy. I think you need to do some homework.
  4. Salmon


    What? Strong? Are you kidding? Merkel begs in China for money. Go to school, expensive gas ruin European economy.