BUSINESS

Eurozone mulling over seven scenarios for lightening debt

ELENI VARVITSIOTIS

TAGS: Finance

Seven scenarios for the lightening of the Greek debt are currently being examined by the eurozone, according to a document Kathimerini has seen. The favorite scenario for the time being concerns the repayment of the International Monetary Fund’s loans through resources from the European Stability Mechanism.

The issue was first discussed at the Euro Working Group on May 12, with eurozone finance ministry officials only agreeing to a very small debt lightening, but a second discussion that followed on Wednesday provided details on all scenarios, with the crucial note that slashing the debt will ease Greece’s return to the markets.

The first scenario provides for the leveling of the size of installments to the European Financial Stability Facility down to the average amount required. The second dictates the adjustment of the EFSF/ESM funding strategy, which could lead to a long-term drop in interest rates. The third concerns the abolition of the growing interest rate difference related to the second bailout’s loans used for the buyback of bonds.

A fourth idea provides for the repayment of the IMF loans using ESM capital originally set aside for the recapitalization of banks. The fifth scenario concerns the acquisition of the first bailout’s bilateral loans via unused ESM funds. The sixth regards the reprofiling of the EFSF debt, extending maturities by five years on average, and the seventh is about returning to Athens the Eurosystem’s profits on Greek bonds.

Meanwhile the IMF is sticking to its position demanding strong measures to lighten the Greek debt, with spokesman Gerry Rice saying on Thursday in Washington that the repayment time for the eurozone loans to Greece ought to be extended, with a long grace period and a reduction in the interest Athens pays. The eurozone has repeatedly voiced opposition to such measures.

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