EIB inserts drachma clauses in loans to Greek firms

By Chryssa Liaggou

The European Investment Bank is hedging itself against a Greek exit from the eurozone by inserting drachma clauses in the loan deals it signs with Greek enterprises.

The first such deal was two weeks ago when the management of Public Power Corporation (PPC), the country?s electricity giant began negotiating with the EIB about a 70-million-euro loan to fund its new natural-gas-powered plant at Megalopoli in the Peloponnese.

The EIB proposed for the first time two new terms, one of them being the possible renegotiation of the agreement should Greece leave the eurozone or should the common currency area break up. The second was placing the agreement under English law, in case of any irregularities in the payback process.

PPC referred the issue to the Finance Ministry, which undertook negotiations with the EIB as it realized that those terms did not just concern PPC but also the general credit policy of the bank toward Greece.

EIB sources suggest that the currency-change clause will be included in all contracts with countries applying economic stability programs (Greece, Portugal and Ireland) and gradually expand to all eurozone countries.

Sources suggest that the bank has made it clear to the political leadership of the Finance Ministry that the whole of the new contracts for loans to Greek companies will have the so-called ?drachma clauses? and will be under English law.

The EIB has committed itself to issuing loans of 600 million euros up to January 2013 to the Greek market, to climb to 1.4 billion euros by the end of 2015.