The Greek delegation goes to the European Union Summit on Thursday with two non-negotiable requests, hoping that the EU political leadership would decide to promote a definitive solution for Greece before September 15.
This is what Greek FinMin Evangelos Venizelos told his German, Italian and French counterparts during consecutive phone calls yesterday. He is expected to continue the telephone contact with the rest of the Eurozone FinMins today.
The main concern of the economic team is Greece to regain access in the markets no later than 18-24 months in order to cover the medium-term cash needs to pay off old debt and finance growth activities. But to help Greece regain access to markets, the European Summit should send a clear message to investors that both the medium-term funding needs and the financing of Greek banks are ensured.
These are the two prerequisites set by the Greek government ahead of the European Union Summit. Regarding the sustainability of Greek debt, Greece does not seem to reject any proposal, except a violent mandatory haircut of bonds that would exclude the country from the markets for decades.
As for voluntary haircut, Greece could be financed to buy cheaply the bonds and eliminate an important part of the debt, provided that there would be changes to the European rescue fund. This proposal has not been rejected by Greece, however there are several technical details in abeyance. But the government is attracted by the solution of voluntary extension of repayment period of bonds maturing in the next 8 years.
As for the capital security of domestic credit institution, the Greek government considers that the European Central Bank should continue to accept Greece’s guarantees to provide liquidity to Greek banks, which are expected to have an increased participation in the scenario of extension. Just in case there would be the “cushion” of the EFSF, which would be enhanced. However, the government would prefer to avoid the possibility of a Greek bank to resort to the EFSF.
(source: capital)
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