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08 February 2012

FN: ECB to make concessions on Greek debt


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The article says that the European Central Bank has made key concessions over its holdings of Greek government bonds that will contribute to a reduction of the country's debt burden.


The ECB has agreed to exchange the Greek government bonds it purchased in the secondary market last year at a price below face value, provided the debt restructuring talks under way find a successful outcome.

The ECB won't make a loss on the transaction, but it is not clear whether the bank will exchange the bonds at the below-par price at which it purchased them or whether it will make a profit, these people said.

The idea is for the ECB, in effect, to exchange the Greek bonds it holds for bonds of the European Financial Stability Facility, the eurozone's temporary bailout fund. The ECB will hold the highly-rated EFSF bonds on its balance sheet in place of the Greek bonds it bought as part of its Securities Market Programme. The EFSF will not hold the Greek bonds on its balance sheet, but will return the bonds to Greece, and Greece will then agree to repay the EFSF for the purchase price of the bonds.

The arrangement could reduce Greece's debt by as much as €11 billion - the difference between the ECB purchase price of the bonds and their face value - though the actual reduction could be smaller.

Full article (FN subscription required)



© Financial News


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