Eurogroup Considers Direct Transfers To Greece – Press
FRANKFURT (MNI) – The Eurozone is considering direct aid transfers
to Greece for the first time to find a more sustainable solution to the
country’s ongoing sovereign debt crisis, Germany’s daily Sueddeutsche
Zeitung reported Thursday, citing a source in the negotiations.
The transfers would come by radically slashing the interest rate
Greece pays on existing Eurozone loans. Taxpayers could for the first
time take a loss given the higher interest rates creditor countries
would have to pay to finance this debt themselves.
Loans that are already provided by the EFSF rescue fund could also
be offered at 0% or near-0% rates, with other Eurozone members here too
making up the difference, according to the report.
The paper did not report how much support such moves have within
Eurozone governments, or how much money this might provide Greece, nor
when such a decision might be taken.
The European Central Bank is also still weighing additional support
by offering Greece’s government the profits from any eventual sale of
its own Greek bond holdings, which were purchased at a heavy discount in
2011, the paper reported.
Greece faces an additional budget shortfall totalling E32 billion
dollars for 2013-2016, after Eurozone finance ministers this week agreed
to give Greece an additional two years to meet its fiscal targets amid a
German business daily Handelsblatt late Wednesday reported that
Eurozone finance ministers were prepared to approve next Tuesday
Greece’s additional financing needs through 2014 – amounting to E13.5
billion and also met through lower interest rate payments – but will
leave open how to close the remaining gap for between 2014 and 2016.
The possibility of direct transfers was raised to prevent the
International Monetary Fund from exiting the Greece aid program and
formed the background of a very public disagreement Monday between IMF
Managing Director Christine Lagarde and Eurogroup head Jean-Claude
Juncker, Sueddeutsche Zeitung said.
Lagarde insisted Eurozone members accept that Greece will require
some level of Eurozone taxpayer funding to have a realistic chance of
meeting its long-term goal of returning to debt sustainability – a
debt/GDP ratio of 120% – by 2020.
Lagarde said the IMF would be forced to withdraw from its joint aid
program with the EU if Greece is given an extra two years to meet this
debt sustainability goal, an extension which Juncker Monday said the
Eurogroup supported. Such a delay would violate the IMF’s lending rules.
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