Eurozone ministers agree on ‘steps’ do not rule out Greek default
Following eight hours of talks in Brussels on Monday on how to stabilize the eurozone, finance ministers from 17 member states declined late on Monday to rule out the possibility of a selective Greek default, but said that ?steps? would be taken in order to buttress rescue efforts for troubled economies.
In a statement in the early hours of Tuesday following their meeting, the ministers, who have been watching market pressure build up on Italy with growing concern about the knock-on effect of the Greek debt crisis, reaffirmed their ?absolute commitment to safeguard financial stability in the euro area? and pledged measures ?to improve the euro area?s systemic capacity to resist contagion risk.?
Among the measures being considered are cheaper loans, longer maturities and a more flexible rescue fund.
The ministers said that they will be looking at strengthening the European Financial Stability Fund (EFSF) — with a current lending capacity of 440 billion euros — which is useful for smaller economies like Greece, though not large enough to bailout economies like those of Spain and Italy.
Lengthening maturities of loans and lowering interest rates would give crisis-hit countries more time to pay back under lower interest, they said, ?including through a collateral arrangement where appropriate.?
Ministers are also considering buying back Greek debt or the private sector swapping holdings for longer-dated maturities in a move to make Greece?s debt more sustainable.
It was not clear, meanwhile, whether the ministers had made any progress on how to make banks, insurers and other funds share the cost of additional funding for Greece.
One national official, however, told Reuters that they were moving closer to sharing the cost of easing Greece’s debt burden with investors even if credit ratings agencies were to declare a default.
?I would read this as an acknowledgement by the member states that a selective default is going to be difficult to avoid. It removes an obstacle to the participation of the private sector,? the official said, speaking on condition of anonymity.
Finding a way to a alleviate the debt burden on Greece was the chief topic on the agenda, with Greek Finance Minister Evangelos Venizelos pointing out that ?Greece is a laboratory where the endurance of the euro is being tested.?
Eurozone officials are hoping concrete decisions on Greece can be taken at another meeting later this month, but Germany’s finance minister, Wolfgang Schaeuble, was quoted by Reuters as saying that there was time until September, a date others say is too far off given the market onslaught against Italy.
?We have time on Greece,? Schaeuble told German radio station Deutschlandfunk. ?The next tranche is due in September. By then a new program has to be decided,? he said.
