15 October 2013

Kathimerini: Samaras pleads for solidarity in Brussels but third programme looms for Greece

Greece is facing the possibility of further austerity measures next year, with its looming financing gap making a third bailout and subsequent consolidation programme appear highly likely.

The Prime Minister’s visit came a few hours after a meeting of eurozone finance ministers in Luxembourg, where European Central Bank executive board member Jõrg Asmussen suggested that Greece would need to make further savings or increase its revenues next year to cover a fiscal gap. Greek Finance Minister Yannis Stournaras insisted that Asmussen did not repeat this claim, made to reporters, during the Eurogroup. But sources told Kathimerini that Greece might have to find an extra €2 billion next year on top of about €4 billion it has already planned to save in the draft budget.

The next stumbling block is the financing gap, which Asmussen suggested could be as high as €6 billion. The ECB official ruled out the possibility of the bank, or other eurozone central banks, rolling over the Greek bonds they hold to cover the gap.

Greece has suggested that it could roll over €4.4 billion in bonds held by Greek banks. The notes, given to the banks by the Greek government in 2009 in return for preferential shares, mature next year. Exchanging them for new ones could provide the government with a breather.

However, sources told Kathimerini that the ECB would likely block this move as well. The reason is that these bonds have been recorded on banks’ books and if the government does not pay out, it will impact the ratio of a lenders’ core equity capital to its total risk-weighted assets, which is known as the Tier 1 capital ratio. Sources said that the rollover would push two Greek banks’ Tier 1 ratio under the 9 per cent demanded by European banking rules. This would lead to those lenders requiring further recapitalisation, which would come at the expense of the Greek state and would defeat the purpose of the initial bond swap.

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© Kathimerini