BRUSSELS (MNI) – Eurozone finance ministers meeting today in
Brussels made little progress on concrete details of a second rescue
package for Greece but agreed to widen the potential scope of Europe’s
bailout fund, a move that could benefit Greece, Ireland and Portugal.
“Ministers stand ready to adopt further measures that will improve
the euro area’s systemic capacity to resist contagion risk,” Eurogroup
President Jean-Claude Junker and EU Economic and Monetary Affairs
Commissioner Olli Rehn said, reading from the same statement. The
measures envisioned include “enhancing the flexibility and scope of the
[European Financial Stability Facility], lengthening the maturity of the
loans and lowering the interest rates, including through a collateral
arrangement where appropriate,” they said.
All “bailout countries” could benefit from the greater flexibility
and scope envisaged for the EFSF, Junker confirmed.
The non-specific wording of the Eurogroup’s statement appears to
leave the door open for a variety of potential measures including
sovereign bond purchases and the possibility that the EFSF could be used
to fund purchases of Greek bonds at discounted prices.
The European Central Bank, anxious to limit its own exposure to
peripheral sovereign debt, has repeatedly urged greater powers and
funding for the EFSF and its successor, the European Stability
Mechanism. The ECB would like nothing more than to be relieved of the
role it has played for more than a year as guarantor of stability in
sovereign bond markets.
In recent months, the ECB has ceased to play that role
unilaterally, declining to buy more sovereign bonds even in tense market
conditions, like the ones that have prevailed in recent days, which
would have induced the bank to intervene several months ago.
Today’s meeting had been billed as a discussion on whether and how
to include the private sector in a new bailout for Greece. This is a
significant shift in the terms of the debate, since the topic had been
considered taboo until recent months.
Eurogroup president Junker said “there will be private sector
involvement” in Greece’s next bailout and added that the details would
be worked out “shortly — meaning as soon as possible.”
French Finance Minister Francois Baroin, speaking moments later in
a separate briefing, said the Eurogroup statement did not exclude
France’s proposal for a voluntary 30-year rollover of Greek debt by
private investors.
The ECB which has warned against pressing for private sector
contributions, stuck to its guns. It reaffirmed its position, in the
text of the Eurogroup statement, that “a credit even or selective
default should be avoided.” This was in contrast to the ministers’
insistence that all options, including those that may be considered a
selective default or credit event by rating agencies were being
considered.
Clearly, the meeting yielded no agreement on the sensitive subject
of private sector involvement.
What it did yield was a lot of promises, without many details, to
ensure stability in the Eurozone.
“We would not exclude any option”, said Rehn.
The Eurogroup communique said the finance ministers reaffirmed
their “absolute commitment” to safeguard financial stability.
With regard to Greece specifically, the Eurogroup said EU
governments will “explore the modalities for financing a new
multi-annual adjustment programme, steps to reduce the cost of
debt-servicing and means to improve the sustainability of Greek public
debt.”
Rehn said that preparations on a new Greek bailout would intensify
before the next tranche of aid is due to be disbursed in September, thus
signaling that a firm decision would likely be delayed until after the
summer.
Earlier in the day, the ministers signed a treaty formally
establishing the ESM, which will have an effective lending capacity of
500 billion euros, supported by 80 billion euros of paid-in capital and
620 billion euros of capital commitments and guarantees from Eurozone
governments.
–Brussels Bureau, Peter Koh; pkoh01@gmail.com
[TOPICS: M$$EC$,M$X$$$,MT$$$$,MGX$$$,M$$CR$]
