Eurozone finance ministers meeting in Brussels have called on Greece to reach a deal with its private sector creditors “in the next few days”. According to the BBC, they said creditors must accept a lower rate of interest on loans to Greece than the 4 pc they had offered. Ministers confirmed that EUR 130 bln was available for the country. However, they called for Greece to accelerate structural reforms to strengthen its economy and growth before funds would be released. The group, headed by Luxembourg’s Prime Minister Jean-Claude Juncker, said Greece’s future was within the euro. “We welcome the increased convergence and ask the Greek government to reach in the next few days a common understanding on the main terms and conditions of the PSI -private sector involvement – offer,” said Juncker early on Tuesday. In his turn, Greek finance minister Evangelos Venizelos said a deal between Greece and its private-sector creditors is in the offing. “I think (a deal with the private creditors) is very possible because there’s common interests,” Venizelos told, quoted by ekathimerini.com. He said the deal could be done as early as this week.
The eurozone finance ministers announced that it expected Greece’s private sector creditors to accept a nominal 50 pc cut to the value of the loans they have made to Greece. It also made clear it backed Greece in its negotiations with private lenders over the rate of interest it should pay on new bonds that will replace existing bonds held by creditors. “Ministers asked their Greek colleagues to pursue negotiations to bring the interest rates on the new bonds to below 4 pc, which implies the interest comes down to well below 3.5 pc,” Juncker said. Without a deal, Greece will not receive the bailout funds it needs to make billions of euros of loan repayments in March. Ministers also called on the Greek government and the so-called troika – the European Commission, European Central Bank and the IMF – to agree the key parameters of an “ambitious” adjustment programme as soon as possible.
In the same announcement, Klaus Regling, chief executive of the European Financial Stability Facility – EFSF – said the fund’s recent downgrade by rating agency S&P would not affect it. The body was set up to provide financial assistance to stricken eurozone countries. Regling said the downgrade applied only to the fund’s long-term credit rating and did not affect its short-term ability to act. He said that out of three major agencies, only one had downgraded the fund and that the other two, Moody’s and Fitch, had indicated that no downgrade was imminent. Regling pointed out that the fund had successfully auctioned debt on the day after the downgrade and described market reaction to the downgrade as “limited”. The fund’s EUR 440 bln euro capacity was not reduced by the downgrade and the EFSF has sufficient means to support eurozone countries until the introduction of the European Stability Mechanism in July, he said.
Separately, IMF boss Christine Lagarde has said the eurozone needs economic growth and bigger financial firewalls to resolve debt issues.