Could China be white knight?

The government came a step closer to securing funding from China on Thursday in order to support the public debt buyback mechanism in the secondary market.

Addressing Parliament?s Financial Affairs Committee, Finance Minister Evangelos Venizelos stated that he had been in talks with China?s representative in the International Monetary Fund, before adding that ?a third country would allow the creation of a third pillar that could fund the public debt buyback mechanism in the secondary market.?

Venizelos told deputies that the Chinese representative asked him: ?Where do countries such as China that may hold bonds belong? The private or the public sector??

Sources suggest that a country or a group of countries can set up an investment fund and lend to Greece at a low interest rate so that the country can buy bonds from the secondary market. In theory the buyback mechanism can be supported by funds from a third country to complete part of the buyback process.

Venizelos also stressed that Greece is considerably relieved because ?up to 2020 we will have our backs covered regarding our need to pay back the international private sector.? He added that the new loan contract will also apply to the part of the first loan that has not been disbursed yet. This means that the 45 million euros from the original 110-million-euro package will come with the lower new interest rate. The maturity of the funds already disbursed, based on loans between states and not through the European Financial Stability Facility (EFSF), will be extended further.

However, Venizelos signaled a change in the privatization policy, telling the committee that the state may maintain its 34 percent state in gaming company OPAP, one of the country?s most profitable firms.

?With the changes on the way, we now have a different environment that is strengthening OPAP very much. We will see to it that OPAP is strengthened and then decide what is the best way for us to utilize it,? Venizelos told the committee, which discussed the bill for the regulation of games of chance in Greece.

This is seen as a step back from the midterm fiscal plan that Venizelos himself had brought to Parliament just a month ago, which provided for the sale of the 34 percent stake in the last quarter of this year.

This process appears now to have been put back, with market estimates putting the sale date for the holding in OPAP in the last quarter of 2012.