By Costas Karkayiannis
Greeceĺs European partners are contemplating a fresh restructuring of the countryĺs debt so as to bring it down to 70-100 billion euros and contain it close to 100 percent of the gross domestic product, according to a Reuters report on Friday.
Citing anonymous European officials, the report says the most likely scenario is for a haircut on the bonds held by the European Central Bank, the national central banks and possibly the eurozone states.
European officials believe that a second debt restructuring, which would now be a case of official sector involvement (OSI), is the last chance for Greece to remain in the eurozone. The ECB refused to comment on the report.
The aim of the new restructuring is to cut Greeceĺs debt by 30 percent, or 70-100 billion euros, as it is now becoming generally accepted that the first restructuring in March, which only involved the private sector, was not sufficient and that the recession of the Greek economy combined with the derailment of the Greek bailout program in recent months have rendered the achievement of the targets impossible.
There have been growing rumors over the last few weeks according to which the International Monetary Fund would no longer be willing to continue funding the Greek program unless the countryĺs debt becomes sustainable again.
With Reuters reporting that the cost of the second restructuring will be borne by the ECB and the 17 national central banks, a number of them including the ECB will also require recapitalization themselves.
Discussions and planning are only at an early stage, Reuters reported, but an anonymous European official involved in the talks said, ôIf I had to say what the chances are of an official sector involvement in Greece, I would say 70 percent.ö
Another official said: ôOur biggest mistake was that we did not manage to haircut the Greek bonds held by national central banks. That was really, really stupid.ö