Bradley Associates Spain

Germany Seeks to Avoid Two-Step Vote on Greek Aid

By BlackboxPulse on | From bbpulse.blogspot.com

Germany wants euro-area financechiefs discussing the Greek crisis next week to avoid splittingconsideration of a 130 billion-euro ($171 billion) rescue and abond swap of the nation’s debt, coalition lawmakers were told.
As long as Greece meets conditions for the aid, the financeministers gathering in Brussels will probably approve thepackage along with the debt exchange, three German officialsinvolved in a telephone briefing by German government officialssaid. A Finance Ministry spokesman declined to comment.
Wrangling among euro-area finance ministers on a Feb. 15conference call over how to reduce Greece’s debt load andtighten control of the aid raised the prospect of a two-stepprocess, according to two people familiar with the talks. Inthat scenario, the ministers’ Feb. 20 gathering in Brusselswould be limited to kicking off the bond exchange and deferringdecision on the rest of the bailout funds.
“We expect the Greeks to rise to their responsibilities,”German Deputy Finance Minister Steffen Kampeter told a group oflawyers in Hamburg yesterday. “This coming Monday, we will seewhether Greece delivers or whether we will be forced to decideon another course of action, one that is not desired.”
As recriminations fly between Greece and its northernEuropean creditors, the clock is ticking toward a March 20 bondredemption when Greece must pay 14.5 billion euros or triggerthe first sovereign default in the euro’s 13-year history.

Crisis Agenda

German Chancellor Angela Merkel put her crisis-fightingagenda on hold today as she abandoned a visit to Italy where shewas due to meet Prime Minister Mario Monti, to focus on domesticpolitics as German President Christian Wulff quit. She will holda three-way phone conversation with Monti and Greek PrimeMinister Lucas Papademos, and the Italian and German leaderswill stay “in close touch” before the finance ministers’meeting, Monti’s office said in an e-mailed statement.
The timetable of the Brussels gathering on Feb. 20 has nowbeen brought forward to 3:30 p.m. in the Belgian capital insteadof the usual 5 p.m.
Investors have sent the euro and global stocks higher asthey anticipate the culmination of the seven-month effort tocomplete a second bailout for Greece. The currency was littlechanged today at $1.3139 as of 12:18 p.m. in Berlin after risingyesterday for the first time in five days.

Austerity Measures

While Greek lawmakers this month passed austerity measuresthat were required for the aid, the euro ministers wrestled withthe latest setback, hearing on their call that Greece would missdebt-reduction goals. Without further measures to close thefunding gap, Greece’s debt would fall to 129 percent of grossdomestic product in 2020, missing a target of 120 percent, saidthree people familiar with the talks who declined to be namedbecause they are still in progress. Last year, the level wasabout 160 percent.
European authorities are discussing charging it lowerrates, the three officials said. Greece obtained its first, 110billion-euro loan package in May 2010 at rates averaging 5percent. Euro governments have already cut that figure once, toabout 4 percent in March 2011.
Central bankers have also indicated that the ECB couldfunnel future profits from its Greek bond holdings to nationalgovernments and on into the crisis program. They have agreedthat they “don’t wish to make a profit on Greece,” ECBGoverning Council member Luc Coene of Belgium said this week. AnECB spokesman declined to comment.

Bond Losses

More controversial is a proposal for national central banksto take part in the private exchange by accepting losses onGreek bonds in their investment portfolios. France is virtuallyalone in backing that idea, one of the officials said.
The ECB is swapping its Greek bonds for new ones to ensureit isn’t forced to take losses in a debt restructuring, threeeuro-area officials said. EU discussions on a proposal to set upan escrow account to ensure that Greek aid money goes to payingcreditors are still under way, a Greek government official saidin Athens today.
The multiple scenarios led to a possible two-step decision-- authorizing the bond exchange next week and then completingthe 130 billion-euro public aid program -- that would raisepolitical risks by requiring two votes in some nationalparliaments.
It would also turn a planned March 1-2 summit of Europeanleaders into a showdown over Greece, after countries includingthe Netherlands and Finland called for delaying the full packageuntil after Greek elections in April or later.

Bond Exchange

The bond exchange can only go ahead once governmentsauthorize the European Financial Stability Facility to provide30 billion euros, to be used in cash or collateral as anincentive to investors.
Euro officials are targeting a window of Feb. 22 to March 9to complete the transaction, the German lawmakers were told.Greece will submit legislation to parliament on Feb. 21 to allowcollective action clauses that could force bondholders resistinga debt swap to take part in the exchange, Naftemporiki reported,without citing anyone.
Greek leaders have no more “wiggle room” even as theyseek to maintain a minimum level of public support going intoelections that may take place in April, Deutsche Bank economistsGilles Moec, Marco Stringa and Mark Wall wrote in a note toclients yesterday.