SCHEDA - Crisi zona euro, le opzioni sul tavolo
BRUSSELS, July 20 (Reuters) - Euro zone leaders will meet on Thursday to discuss a second bailout of Greece and how to stop the region's debt crisis from spreading to Spain and Italy. [ID:nL6E7IK1QO]
Below are the main options which officials have been discussing in the run-up to the summit.
NEW FINANCING FOR GREECE
The leaders are likely to agree on a new round of financing for Greece that would extend to mid-2014, supplementing the 110 billion euro ($156 billion), three-year bailout which was launched in May last year.[ID:nLDE7421WT]
The second bailout is expected to total around 110-120 billion euros. Some 30 billion euros of that amount would come from asset sales by the Greek government; the remainder would be divided between emergency loans from the European Financial Stability Facility (EFSF), which is the euro zone bailout fund, loans from the International Monetary Fund, and a contribution from the private sector in the form of debt relief.
The size of the private sector contribution was originally estimated at 30 billion euros but is now unclear, as is the form which the contribution will take. Proposals for four main forms are being discussed, and officials say that ultimately, a combination of more than one may be used, or each private investor may be allowed to choose between them:
a) Bond buy-back. The EFSF would lend money to Athens, which Greece would then use to buy back outstanding bonds, probably at market prices; some Greek bonds are trading at roughly 50 percent discounts to their face value.
This option could conceivably reduce Greece's debt substantially, although not by enough to solve the problem; private investors are estimated to hold only about 190 billion euros of Greece's 340 billion euros of sovereign debt. Analysts think the debt would have to be roughly halved to 80 percent of gross domestic product to make it sustainable in the long term.
By cutting the value of Greek banks' bond holdings, this option would probably make it necessary for the EFSF to recapitalise the banks. It would almost certainly prompt credit rating agencies to assign a limited default rating to Greek debt, which could destabilise Europe's financial markets as they speculated about similar ratings for Ireland and Portugal; it could also prevent Greek banks from using the bonds as collateral when borrowing from the European Central Bank.
b) Bond swap. Germany floated the idea in June; private investors would be given a certain amount of time to swap their Greek bonds for new paper of longer maturities -- under the German proposal, maturities would be lengthened by seven years.
Banks want the new Greek bonds to be guaranteed by AAA-rated securities, for example EFSF bonds; euro zone sources say the amount and form of such credit enhancements are under discussion.
Once again, this option would probably require a recapitalisation of Greek banks and prompt a limited default rating to be assigned to Greece.
c) Bond rollover. This would aim to have investors voluntarily maintain their exposure to Greece by purchasing new bonds as their existing ones expired. Rollover proposals are complex, though, because of efforts to make them attractive to investors; one proposal by French banks in June would give investors back 30 percent of maturing Greek bonds in cash and reinvest the rest in new Greek paper with 30-year maturities, which would be guaranteed by AAA paper and carry interest linked to Greece's economic growth rates. [ID:nL6E7HS29S]
This option would probably also trigger a limited default rating for Greek debt.
d) Tax on European financial sector. Funds raised could be applied to reducing Greece's debt, perhaps through a buy-back; one euro zone source estimated a tax on all banks in the euro zone, whether holding Greek bonds or not, could produce up to 10 billion euros a year, or 30 billion over three years.
This would have the advantage of appearing unlikely to trigger a downgrade by credit rating agencies. But banks strongly oppose the idea and lawyers say it might be difficult to implement quickly, given the lengthy legislative process in the European Union and the legal challenges which such a tax might encounter. Governments may only be proposing this option as a way to pressure investors into accepting other options.
LOWER EFSF LENDING RATES, LONGER LOAN MATURITIES
Euro zone finance ministers decided on July 11 that: "Ministers stand ready to adopt further measures that will improve the euro area's systemic capacity to resist contagion risk, including enhancing the flexibility and the scope of the EFSF, lengthening the maturities of the loans and lowering the interest rates, including through a collateral arrangement where appropriate."
Sources familiar with the talks say all three euro zone bailout countries, Greece, Ireland and Portugal, may be given better terms on current and future loans.
EFSF lending rates are now 200 basis points above its own borrowing costs for loans up to three years, and 300 bps for longer credit. Some sources say bailout loans with maturities of 7.5 years could have their tenors doubled or even quadrupled.
Euro zone officials believe that if the private sector contribution to the second Greek bailout is in the form of a bond swap or buy-back, EFSF lending terms will not need to be softened much. But rates would have to be lowered and maturities extended if there is a rollover or bank tax.
EXPANDING THE POWERS OF THE EFSF
A senior euro zone source told Reuters this week that officials were in talks to let the EFSF buy bonds of euro zone countries from the secondary market, and to extend flexible, precautionary credit lines to governments which had sound economic policies but whose debt was under market pressure.
Precautionary EFSF credit lines could resemble flexible credit lines extended by the IMF to, for example, Mexico and Poland, where they have been successful. They would allow the EFSF to act pre-emptively, before a rise in market borrowing costs of a country had forced it to seek a full-fledged bailout.
Expanding the EFSF's powers could be a difficult and time-consuming process, requiring the approval of some national parliaments in the EU. Germany has in the past opposed proposals to have the EFSF buy bonds from the secondary market.
ENLARGING THE EFSF
The EFSF has an effective lending capacity of 440 billion euros. There are calls for this to be doubled or even tripled, to ensure the facility has the resources to cope if the crisis spreads to Spain and Italy.
But enlarging the fund would be so controversial, requiring approvals from some national parliaments, that euro zone official sources say a decision on it is unlikely to be taken at this week's summit.
STIMULATING GREEK GROWTH
Euro zone officials are now putting more emphasis on pulling Greece out of recession; the negative impact on growth of austerity steps in the first package is seen as a defect.
Greece has received just 4.9 billion of 20.2 billion euros of EU development funds earmarked for it from 2007 to 2013; last week it reached a deal with the European Commission to speed disbursement of the funds. The EU's co-financing rate for projects will rise to 85 percent from an average 73 percent, cutting the financing that Athens must provide [ID:nLDE76D1CL]
European Commission President Jose Manuel Barroso appointed a task force on Wednesday to help Greece use the funds.
This week's summit may reiterate or expand on these steps.
© Thomson Reuters 2017 Tutti i diritti assegna a Reuters.