BRUSSELS (MNI) – The Eurozone and International Monetary Fund will
have to dramatically rethink their latest rescue plan for Greece,
announced just four days ago, if a planned debt buyback fails to reduce
the country’s outstanding debt sufficiently, a senior EU official said
Friday.

“There is no ‘plan B’,” the official said, adding that “finance
ministers would have to have a complete reassessment,” if the buyback is
not successful.

Although the details of the buyback plan probably won’t be
announced until Monday, a rise in Greek government bond prices sparked
by expectations of the deal, are already complicating its outlook.

Greek government bond prices are now trading above the ceiling
price of 28.1 cents on the euro at which Eurozone finance ministers said
the deal must take place.

Still, the EU official said he was “confident” that the buyback
programme would “yield the desired result” and that the IMF, whose aid
is conditional on the deal’s success, would approve further aid for the
struggling country, which recently has made considerable efforts to
shore up its finances and overhaul its economy.

Eurozone finance ministers will not be able to approve the other
elements of Greece’s latest rescue package until after they have
measured the success of the buyback deal in mid-December, the official
said.

The expectations of Greece’s bailout partners for the buyback are
“not unsubstantial,” he added.

Elaborating on the Eurogroup’s thinking, the official said that no
“automatic threshold” had been set but that the ministers did expect to
make a “qualitative” assessment of the buyback programme that would
consider the volume, price and the extent to which the Greek financial
institutions participate.”

At their meeting on Monday, the 17 Eurozone finance ministers are
also set to discuss the “building blocks” of a rescue package for
Cyprus, whose economy has been devastated by its finance sector’s close
ties to Greece.

The European Commission, IMF and ECB, have worked with Cypriot
authorities on reforms to the island nation’s banking sector, fiscal
policy, and other structural measures. But the full scale and scope of
any aid for Cyprus cannot be fully worked out until an independent
analysis of its banks’ capital requirements is completed, the official
said.

A bank-by-bank analysis being conducted by fund manager PIMCO is
not expected until the end of next week, or the week after, the official
said.

Turning to Ireland and Portugal, which Eurozone governments and the
IMF have also bailed out, he said that the two countries should not
expect to benefit from all the concessions made to Greece.

The fact that they have already been exempted from having to
contribute their share of the ECB’s profit on Greek government bond
holdings should be considered “a bonus,” he said.

–Brussels Newsroom, +324-952-28374; pkoh@mni-news.com

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