Greece's debt may have to be cut by 60%: Eurozone report
BRUSSELS: Eurozone finance ministers said on Saturday that they have agreed that banks should accept substantially bigger losses on their Greek bonds, with a new report suggesting that writedowns of up to 60 per cent may be necessary.
The report from Greece's international debt inspectors, which formed the basis for discussions at the finance ministers' meeting Friday, says that in order to keep rescue loans from the eurozone to the (euro) 109 billion ($150 billion) foreseen under a second bailout deal tentatively reached in July, Greece's debt would have to be cut by 60 per cent.
Even that would leave the country's debts still at 110 per cent of economic output in 2020.
"Yesterday we agreed that we need a substantial increase in the contribution from the banks," said Jean-Claude Juncker, Luxembourg's prime minister who also chairs the meetings of eurozone finance ministers. That means the July deal, under which banks would have taken writedowns on their Greek bondholdings of about 21 per cent, is definitively off the table.
Austria's Finance Minister Maria Fekter told journalists that the eurozone's chief negotiator Vittorio Grilli had been asked to restart negotiations with banks.
Greek Finance Minister Evangelos Venizelos confirmed as he arrived for the meeting that leaders were looking for banks to write down more than the July agreement envisaged. "But in any case, Greece is not a central problem for the eurozone," he said. "Now the point is to take a more general and more constructive decision for eurozone as a whole."
The report did not make policy recommendations, and in fact the European Central Bank opposes cutting Greece's debts further. But finance ministers are clearly paying close attention to the document.
Another scenario showed that if Greece's debts are cut by 50 per cent, the country would need (euro) 114 billion ($157 billion), on top of the July package.
The agreement to push for much bigger losses is a key step in helping Athens eventually dig out from underneath its debt burden.
But asking banks to more significantly write down their Greek debt will raise concerns about their ability to withstand the losses as well as the ensuing turmoil on financial market.
As a result, the finance chiefs from the 27 EU countries, meeting Saturday in Brussels, are also expected to force banks across the continent to raise billions in capital for their rainy-day funds.
Both measures are critical to solving Europe's debt crisis, which is now threatening to engulf larger economies like Italy and Spain and is blamed for dampening growth across Europe and even the world.
"The crisis in the eurozone is doing real damage to many of the European economies, including Britain," George Osborne, Britain's chancellor of the exchequer, said as he headed into Saturday's meeting. "We have had enough of short-term measures, sticking plasters that get us through the next few weeks."
European leaders had promised a solution would come from a summit on Sunday _ following the two days of finance ministers' meetings _ but they have now scheduled another get-together of EU leaders for Wednesday. Still, this weekend, they appeared to be making progress.
courtesy economic times
BRUSSELS: Eurozone finance ministers said on Saturday that they have agreed that banks should accept substantially bigger losses on their Greek bonds, with a new report suggesting that writedowns of up to 60 per cent may be necessary.
The report from Greece's international debt inspectors, which formed the basis for discussions at the finance ministers' meeting Friday, says that in order to keep rescue loans from the eurozone to the (euro) 109 billion ($150 billion) foreseen under a second bailout deal tentatively reached in July, Greece's debt would have to be cut by 60 per cent.
Even that would leave the country's debts still at 110 per cent of economic output in 2020.
"Yesterday we agreed that we need a substantial increase in the contribution from the banks," said Jean-Claude Juncker, Luxembourg's prime minister who also chairs the meetings of eurozone finance ministers. That means the July deal, under which banks would have taken writedowns on their Greek bondholdings of about 21 per cent, is definitively off the table.
Austria's Finance Minister Maria Fekter told journalists that the eurozone's chief negotiator Vittorio Grilli had been asked to restart negotiations with banks.
Greek Finance Minister Evangelos Venizelos confirmed as he arrived for the meeting that leaders were looking for banks to write down more than the July agreement envisaged. "But in any case, Greece is not a central problem for the eurozone," he said. "Now the point is to take a more general and more constructive decision for eurozone as a whole."
The report did not make policy recommendations, and in fact the European Central Bank opposes cutting Greece's debts further. But finance ministers are clearly paying close attention to the document.
Another scenario showed that if Greece's debts are cut by 50 per cent, the country would need (euro) 114 billion ($157 billion), on top of the July package.
The agreement to push for much bigger losses is a key step in helping Athens eventually dig out from underneath its debt burden.
But asking banks to more significantly write down their Greek debt will raise concerns about their ability to withstand the losses as well as the ensuing turmoil on financial market.
As a result, the finance chiefs from the 27 EU countries, meeting Saturday in Brussels, are also expected to force banks across the continent to raise billions in capital for their rainy-day funds.
Both measures are critical to solving Europe's debt crisis, which is now threatening to engulf larger economies like Italy and Spain and is blamed for dampening growth across Europe and even the world.
"The crisis in the eurozone is doing real damage to many of the European economies, including Britain," George Osborne, Britain's chancellor of the exchequer, said as he headed into Saturday's meeting. "We have had enough of short-term measures, sticking plasters that get us through the next few weeks."
European leaders had promised a solution would come from a summit on Sunday _ following the two days of finance ministers' meetings _ but they have now scheduled another get-together of EU leaders for Wednesday. Still, this weekend, they appeared to be making progress.
courtesy economic times
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