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14 June 2011

Eurozone ministers struggled to agree on new aid for Greece


At an informal Eurogroup meeting, Germany and the ECB kept its confrontation over how private banks should participate in this second aid plan, which has increased the nervousness in the markets.

The meeting was convened at the last minute. Berlin requires that the second rescue includes a voluntary exchange of Greek bonds held by private investors due in the next two years for others maturing in seven years. Its aim is to prevent taxpayers assuming the full burden of the new assistance.

But the European Central Bank insists that the smooth restructuring of the Greek debt market created turbulence similar to those that caused the bankruptcy of US bank Lehman Brothers in 2008, that will infect the other peripheral countries of the eurozone. The only private sector participation in the rescue of Greece to accept the ECB is to encourage owners of Greek bonds that mature in the coming months to buy new ones.

The objective is to close a deal in the ECOFIN to be held in Luxemburg on 20 June.

Press release


© European Council


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