Greek bond buyback on the table
Discussions are under way regarding an initiative that would allow the Greek government to buy back debt with help from the European bailout fund, according to Finance Minister Giorgos Papaconstantinou.
?It is one of the ideas that are on the table,? Papaconstantinou told Dow Jones in an interview on Friday. ?It deserves to be discussed, together with other ideas, but there is no specific plan at this point.?
Since late last year, European governments have been discussing plans to beef up Europe?s new emergency financing mechanism, the European Financial Stability Facility (EFSF), to lend money to eurozone countries in need of cheap loans.
Under the scenario now being discussed, the EFSF, which has a triple A credit rating, would borrow from the international markets and lend money to Greece. The loans would be given at a rate significantly below that which Greece currently borrows at.
With that money, Athens would be able to buy back an estimated 50 to 60 billion euros in Greek government bonds thought to be held by the European Central Bank, which bought the debt on the secondary market as part of a program to support the Greek bond market.
Meanwhile, the European Commission said on Friday that ?urgent? consideration was being given to plans that could see new money loaned to Greece from a eurozone bailout fund.
Amadeu Altafaj, spokesman for EU Economic Affairs Commissioner Olli Rehn, also said the such a plan is ?on the table.?
?We believe it is important, that it is urgent to come up with a comprehensive response to all these aspects, including those you mention,? he told a news briefing.
France?s Finance Minister Christine Lagarde added that European leaders are discussing the possibility of the European Financial Stability Facility buying back national bonds, without naming Greece.
?We are discussing it at the moment, I don?t think there is yet general consensus because it?s again work in progress,? she said in Davos.
?But it?s clearly one avenue for the EFSF to actually get involved in markets,? she added, a route that would ease the burden on the European Central Bank, which is currently propping up countries mired in national debt.
