LUXEMBOURG (MNI) – Eurozone finance ministers, following a dinner
meeting that ended in the early hours of Monday morning, issued a
statement urging Greece to implement new austerity measures and a E50
billion privatization plan in exchange for the next tranche of the
country’s bailout loan.

As expected, the EMU finance ministers, known as the Eurogroup,
said parliamentary approval of new deficit-cutting measures and of the
privatization plan would “pave the way” for disbursement by mid-July of
the E12 billion installment of the loan from Greece’s Eurozone partners
and the International Monetary Fund.

Also as expected, the ministers put off until next month any
decision on a new bailout for Greece, estimated to total somewhere
between E100 and E150 billion.

The ministers hope that a significant portion of that money will
come from private creditors re-investing the proceeds of maturing Greek
bonds, but the Eurogroup gave no indication exactly how that will be
achieved or how much might be expected from such an initiative.

Germany last week softened its position on the issue — after weeks
of conflict with the European Central Bank — accepting the
ECB-sanctioned concept of a purely voluntary debt rollover at maturity
rather than the more formal debt exchange Berlin had been promoting.

The ECB had argued strenuously against Germany’s approach, warning
it could lead to a default scenario in which the central bank would no
longer be able or willing to accept Greek bonds as collateral in
refinancing operations. That in turn, would have disastrous consequences
for the Greek banking system and could lead to a contagion effect in
other EMU countries, the ECB had warned.

The Eurogroup statement reflected the apparent new consensus on
private creditor involvement, saying it welcomed “the pursuit of
voluntary private sector involvement in the form of informal and
voluntary rollovers of existing Greek debt at maturity for a substantial
reduction of the required year-by-year funding within the programme,
while avoiding a selective default for Greece.”

However, there clearly is no agreement on how private creditor
rollovers only upon maturity can be entirely voluntary and yet provide a
“substantial” and quantifiable amount of the funding.

The Eurogroup meeting is continuing today. The verbatim text of its
Monday morning statement is below:

“The Greek authorities are embarking on a significant and necessary
adjustment effort. Ministers recognised the considerable progress
achieved by the Greek authorities over the last year, particularly in
the area of fiscal consolidation. Ministers are also conscious of the
serious challenges that Greek citizens are facing in these difficult
times.

“Ministers took note of the debt sustainability assessment prepared
by the Commission and the IMF. The assessment showed that debt
sustainability hinges critically on Greece sticking to the agreed fiscal
consolidation path, the plans of collecting EUR 50 billion in
privatisation proceeds until 2015, and the structural reform agenda
which will promote medium-term growth.

“Ministers look forward to the Commission’s Compliance Report, that
requires the finalisation of the updated Memorandum of Understanding,
which is expected in the coming days, reflecting the outcome of the
ongoing negotiations between the Greek government and the European
Commission, in liaison with the ECB, and the IMF.

“This, together with the passing of key laws on the fiscal strategy
and privatisation by the Greek parliament, will pave the way for the
next disbursement by mid-July.

“However, given the difficult financing circumstances, Greece is
unlikely to regain private market access by early 2012. Ministers agreed
that the required additional funding will be financed through both
official and private sources and welcome the pursuit of voluntary
private sector involvement in the form of informal and voluntary
roll-overs of existing Greek debt at maturity for a substantial
reduction of the required year-by-year funding within the programme,
while avoiding a selective default for Greece.

“On these conditions, Ministers decided to define by early July the
main parameters of a clear new financing strategy.

“Ministers call on all political parties in Greece to support the
programme’s main objectives and key policy measures to ensure a rigorous
and expeditious implementation. Given the length, magnitude and nature
of required reforms in Greece, national unity is a prerequisite for
success.”

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