Euro-Area finance ministers meet on Greece, crisis mechanisms
Baku, January 24 (AZERTAC). Euro-zone finance ministers were meeting Monday to discuss Greece`s debt crisis and efforts to build a stronger firewall to contain its spread as stalled talks on a debt write-down fuelled concerns that a Greek default would spell trouble for the rest of the region, The Wall Street Journal reports.
The ministers will also look at a draft plan for a fiscal pact for the 17-member currency bloc that seeks to impose tougher budget rules and sanctions for those countries that fail to meet targets. Talks will continue Tuesday among all 27 European Union finance ministers.
But Greece is likely to be at the forefront after talks to restructure its debt bogged down over the weekend as pressure piled on private creditors to accept deeper losses to ensure the country`s debt will be sustainable over the long term.
Greek Finance Minister Evangelos Venizelos is expected to update his counterparts on the state of play in the talks with private-sector creditors to restructure some EUR206 billion of debt.
"We have a very constructive cooperation with the private sector and we are ready to finalize the procedure on time," Venizelos told reporters on his way into the meeting.
EU Vice President for Economic and Monetary Affairs Olli Rehn said the talks have been moving well "at a technical level" and that he is confident they will conclude "shortly, preferably in the course of this week."
Talks in Athens with the Institute of International Finance, which represents the majority of Greece`s private-sector creditors, have dragged on for three weeks and stalled over the weekend because of a dispute over the interest rate on the new bonds replacing the old bonds, the process chosen to write down 50% of Greece`s nominal debt.
People close to the talks said the creditors and Greece were nearing agreement Friday on the interest rates to be paid to creditors on the new bonds, which would average just over 4%.
But while Greece and its creditors are nominally the parties to the negotiation, Germany and the International Monetary Fund have considerable weight. Both are pushing for a lower coupon, with the IMF insisting it not exceed 3.5% on average, the people said.
Austrian Finance Minister Maria Fekter said Monday it is important that Greece reach a deal with its creditors that includes low interest rates "so that Greece has a chance to work down its debt mountain."
Speaking to reporters on her way to the meeting, Fekter said she is aware the banks "aren`t too happy with this." But, she said, "a Greek default would be much more expensive" to them than even the collapse of Lehman Brothers was.
Creditors want at least just over 4.0%. This rate represents a loss to them of 65%-70% in the net present value of existing bonds. That is the most that creditors will accept, say people familiar with the talks.
Germany and the IMF, two of Greece`s main official-sector lenders, have raised concerns about the cost of servicing the remainder of Greece`s debt, because the higher it is, the more funds Greece will need to receive from them in a second bailout.
"The Germans take a very hard line on this," a euro-zone government official said Monday, adding that German opposition could effectively block the process altogether.
IMF Managing Director Christine Lagarde Monday called on all parties involved in the Greek debt talks to help find a sustainable and constructive solution that will help the country to eventually survive on its own.
"My expectation from the IMF point of view is that all the components and all the partners contribute in building a solution that is sustainable for the long term for that country," Lagarde said on the sidelines of an event organized by the German Council of Foreign Affairs. "It`s a matter of everybody participating, the country delivering on its commitment, private sector participating in the process, that means something that is substantial, that is constructive, also means the euro partners and the European Central Bank playing their respective part as well."
The head of the IMF Europe unit, Reza Moghadam, will be attending the meeting.
But it isn`t clear whether the euro-area finance ministers will be able to make decisions on Greece`s debt restructuring and new bailout. Their meeting is in preparation for an EU leaders` summit on Jan. 30, where final decisions may eventually be made.
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