Greek bailout may require up to 145 billion from eurozone

Eurozone governments may have to provide up to 145 billion euros to Athens under a second emergency loan program for Greece, EU sources said on Friday, 15 billion euros more than previously expected.

The extra funds are mainly required to help recapitalize the Greek banking sector once a deal is struck to write down the value of bonds owned by private-sector creditors, the sources said.

“It’s mostly because of recapitalization needs of Greek banks due to PSI,» one of the sources said, referring to what’s called private sector involvement. The other source did not say explicitly that 145 billion euros would be needed, but said that figure was the right order of size.

Negotiations with private sector creditors to take a 70 percent net-present-value writedown on their holdings, cutting Greece’s debts by around 100 billion euros, are close to being concluded.

But it remains unclear how much of a writedown the official sector — the European Central Banks and national eurozone central banks — may have to take on their holdings of Greek government bonds in order to make Greece’s overall debt burden sustainable.

The IMF says Greece’s debts must be cut from around 160 percent of GDP now to 120 percent of GDP by 2020 in order to be sustainable. The conclusion of PSI will help bring the debts close to 120 percent by 2020, but not all the way there.

As a result, there is expected to be a need for the official sector to take a hit, in addition to the extra funds from eurozone governments, the sources said. [Reuters]