Eurozone not preparing third Greek bailout so far, says official
BY Jan Strupczewski & Martin Santa
The eurozone is not making any preparations for a third bailout for Greece and will consider it only if expressly asked by Athens, which has not happened so far, a senior eurozone official said on Thursday.
Instead, the euro zone is now focusing on the timing and size of disbursements of badly delayed tranches of loans that have already been promised under the first two rescue packages, the official, directly involved in the Greek bailouts said.
Euro zone countries have come up with aid of 240 billion euros for Greece to help it reform and put its public finances back in order after since the country was cut off from markets in 2010 because its public finances have spun out of control.
The second eurozone bailout programme for Greece expires at the end of this year. Yet with an inverted yield curve and a 10-year borrowing cost still at around 6.8 percent, Athens can hardly hope to sustainably finance itself on the market.
In February, German media reported that Berlin was preparing for the possibility that the euro zone would have to support Greece with an extra 10 billion to 20 billion euros.
But asked if any plans were being made to help Greece finance itself in 2015 and 2016, the official said:
"Within our circles there has been absolutely no discussion of that, programme for now is up until end-2014."
The International Monetary Fund, which also lends to Greece, has a financing programme running until the first quarter of 2016. The catch is that the IMF will not disburse its money unless Greek financing needs are fully covered during that period, either by the eurozone or markets.
"The Fund (IMF) will require assurance by its European partners that if so required, financing would be available. And I have no reason to doubt that such assurances, if asked, would be given," the official said.
Euro zone finance ministers will meet on Tuesday in Athens to discuss the timetable and size of loan disbursements that Greece should get under the existing programme, after the initial schedule was derailed by six months of negotiations over what the country must do to get the money.
Greece needs 9.3 billion euros to pay for its bonds maturing in May, and the official said the first tranche of the loans that eurozone ministers will discuss on Tuesday will certainly cover such needs.
"Of course the disbursements will be made in a volume and timing that makes sure redemptions are fully insured," he said.
"The ministers will be discussing amounts and we have no firm data on that yet, but I expect it to be in the very low double-digit range or in the high single-digit range," the official said.
There might be one or two more tranches of loans to Greece after that in the next three months, the official said.
Greece said on Wednesday it was «almost ready» to return to the bond markets after a four-year absence and that any bond sale would probably take place after European Union elections in May.
The government, which planned a return to markets in the second half of this year, has been encouraged by falling bond yields to consider a quicker return, although a final decision has not been taken.
"I cannot judge, quite frankly, what the discussions of the Greek authorities are when they look at market rates and may feel compelled or free to start building up a yield curve through successive bond placements," the official said.
"Which they may possibly, given the environment, be starting in the not-too-distant future," he said.
Investors have become more enthusiastic about buying bonds of eurozone countries, driving down yields of all countries that needed eurozone bailouts - Greece, Ireland, Portugal, Cyprus and Spain.
"There is at present, for all programme countries of our macro-assistance programmes, a very, very favourable environment in terms of financing conditions. For sure everybody will be availing themselves of this very, very favourable environment," the official said.
"Will this be done in a such a volume that they (Greece) can immediately wave 'Goodbye' to us, that depends on the specificities of their market access. But the situation is good,» he said.
Given that Greece was already running a primary surplus, which means there is money in the budget before it has to pay debt servicing costs, the amounts that Athens would have to borrow would be very small.
"It is for the Greek authorities to analyse the situation very carefully, which will probably be done once we've got the final view on our disbursement schedule and then have a intense discussion with the debt manager and see what's going to happen," the official said.
"If there ever were to be an extension of the programme (a third bailout) it's for them (Athens) to say: 'We think we would want it', and not for us to say: 'We think you should'."