Gov’t offers to bridge gap in bond buyback

Taxpayer to foot 3-million-euro bill

The government stepped in yesterday and provided a last-minute solution to the bond scandal by offering to pay part of the cost for investment bank JP Morgan to buy back a Greek state bond at the center of the affair.

In a move that shifts the financial burden onto the taxpayer, the Finance and Labor ministries said in a joint statement that they will cover the difference arising from a proposal, put forth jointly by JP Morgan and hedge fund North Asset Management last month, to four local pension funds.

JP Morgan and NAM agreed to buy back the 280-million-euro bond at the full price paid by the funds minus any interest earned since February, when they were issued.

The funds insisted on keeping a nominal return on their investments, estimated at 2.9 million euros.

“There is a difference of opinion between the funds and the international financial organization (JP Morgan) concerning the interest earned during the period the funds held the bonds,” the ministries said.

Once news of the government offer was made public, JP Morgan released a statement from London, criticizing the funds for their stance on the issue.

The funds showed indifference toward the interests of their members, not only during the initial phase of the investment but with their repeated decisions to reject its proposal, according to the investment bank.

The structured bonds were underwritten by JP Morgan and sold to NAM in February at 92.95 percent of their nominal value, and eventually purchased by four Greek pension funds at inflated prices in the secondary market.

Opposition parties attacked the government for getting taxpayers to foot the bill for the alleged corrupt practices of certain officials.

“The stolen money should be returned by those who stole it,” said PASOK spokesman Petros Efthymiou.

“The government cannot be an agent in the cover-up. It should take on its responsibilities in the name of the taxpayer, responsibilities should be taken by those who conducted the theft,” he added.

A prosecutor’s investigation into the incident is currently taking place in a bid to find out whether any criminal activity was involved.

A number of political figures are likely to be questioned over their possible involvement in the scandal, according to sources.

Since the scandal broke just over 100 days ago, Labor and Social Security Minister Savvas Tsitouridis has been sacked by the conservative government.