Debate over buyback, OSI heating up

The financial news agency Bloomberg on Friday added its voice to those calling for a write-down of Greece?s official sector debt, an option favored by the International Monetary Fund but not Germany, which prefers a buyback scheme.

In an op-ed written by its editors, Bloomberg argued a buyback ?could only address a part of the roughly 40 percent of Greece?s 340 billion euros of debt that is privately held? and would leave Greek debt above the target of 120 percent by 2020.

On Thursday, IMF spokesman Gerry Rice backed a proposal by the European Central Bank to repurchase some of the Greek bonds issued to private investors earlier this year. Rice said such a scheme ?could be useful? but the IMF is known to favor a more comprehensive official sector involvement.

There are about 63 billion euros? worth of Greek bonds, of which 22 billion are held by local banks and social security funds, that could be bought at less than face value. If Greece were lent 10 billion euros to buy back its bonds, it could wipe up to 30 billion from its debt pile.

Other options include lowering the interest rate on some 53 billion euros in bilateral loans from Greece?s eurozone partners and recapitalizing Greek banks directly from the European Stability Mechanism.

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