The European Union΄s top economic official said on Thursday that more public money will be needed to make up a shortfall in a second bailout for Greece, if private bondholders agree to take a share of losses.
Economic and Monetary Affairs Commissioner Olli Rehn told Reuters that euro zone governments and EU institutions would need to make up the difference so that Greece΄s public debt can be reduced to approximately 120 percent of annual output by 2020.
Rehn said he expected Athens to reach an agreement with private sector investors in the coming days on a debt swap, under which private investors would take voluntary writedowns on Greek bonds.
“In fact, we΄re quite close to a deal between the Greek government and the private sector community. I would expect it will be concluded in the coming days, preferably still in January, not February,” he told Reuters Insider television in an interview.
The EU and the International Monetary Fund would then update their analysis of Greece΄s debt sustainability, in order to identify the shortfall that must be made up to reach the agreed 2020 target in light of Athens΄ worsening economic outlook and fiscal performance.
“We are preparing a package which will pave the way for a sustainable solution for Greece, and in that package, yes, on the basis of the revised debt sustainability analysis, there is likely to be some increased need for official sector funding, but not anything dramatic,” Rehn said.
Asked whether the European Central Bank should take a share of the burden by renouncing profits on Greek bonds it had bought at a discount on the secondary market, he said he did not wish to speak on behalf of the ECB.
But the required burden-sharing would depend on decisions made by “the official sector and European institutions.” The ECB is the only European institution which holds Greek debt.
It was the first time a top EU official had spelled out that more public money than the planned 130 billion euros would be required for a second Greek bailout package.
(source: Reuters, capital)
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