Asmussen rejects Athens' call for ECB to roll over Greek bonds

ATHENS/LUXEMBOURG Mon Oct 14, 2013 2:56pm EDT

1 of 2. Greece's Finance Minister Yannis Stournaras and Executive Board Member of the European Central Bank (ECB) Jorg Asmussen (R) attend a eurozone finance ministers meeting in Luxembourg October 14, 2013.

Credit: Reuters/Francois Lenoir

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ATHENS/LUXEMBOURG (Reuters) - The European Central Bank cannot roll over Greek bonds as this goes against a ban on financing governments, a senior ECB policymaker said on Monday, dashing Athens' hopes it will help plug a funding gap next year through such a move.

Athens will be financed by bailout loans until the second half of 2014, when it hopes to tap bond markets again. It then faces a funding gap of nearly 11 billion euros for 2014-15, the International Monetary Fund and Athens estimate.

Finance Minister Yannis Stournaras said on Monday that Greece planned to roll over debt next year to narrow the funding shortfall. He said that euro zone central banks had promised to roll over Greek bonds and that if they did not they should make up the difference by other means.

But ECB Executive Board member Joerg Asmussen ruled out the idea, which is banned under the ECB's statutes.

"We must find a way to close this financing gap and there is absolutely no way that it can be done in a way of rollover bond or whatsoever which results in monetary financing," Asmussen told reporters in Luxembourg.

"This is not possible for the ECB and not for the whole euro system."

In the latest in a series of options Greek officials have floated as ways to cover the shortfall, Stournaras said Athens planned to roll over about 4.5 billion euros ($6.1 billion) of debt due next March.

Greece's international lenders have agreed they could give the country further debt relief if it meets fiscal targets this year, likely in the form of lower financing costs or extended repayment times for its loans.

But none of the options Athens has so far come up with for squaring the funding circle have gained much traction abroad.

The European Commission puts Greece's funding gap at 3.8 billion euros in 2014, while the IMF estimates it will be 4.4 billion euros.

CENTRAL BANKS 'OBLIGED TO HELP'

Cut off from bond markets since 2010 after its debt crisis exploded, Greece has been kept afloat by 240 billion euros in rescue loans from the European Union and IMF.

Asked whether Greek bonds held by euro zone central banks should also be rolled over to help cover the post-bailout funding gap, Stournaras was quoted as saying this was part of a November 2012 agreement.

"Greece will ask for debt relief based on the decision by the Eurogroup (in November) and there are many ways this can be done," he told financial daily Naftemporiki in an interview.

"There are Greek bonds held by central banks, which had said they would roll them over but up to now have not done so," he said. "If they do not want to implement this because they consider it monetary financing, they must find equivalent measures".

The ECB and other euro zone central banks hold a nominal 19 billion euros of Greek bonds, of which 10 billion matures in 2014.

Greece's creditors - mainly the EU and the IMF - have agreed to look into the bloc's 17 national central banks replacing some of the Greek bonds they hold with new Greek paper as the debt matures.

This measure, called the "rollover of ANFA holdings", might spare Greece from having to redeem 3.7 billion euros of debt in 2013-2014 and 1.9 billion euros in 2015-2016.

As well as Asmussen rejecting this idea on Monday, the ECB has said before that it would not roll over the Greek bonds it acquired through the Securities Markets Programme (SMP).

But Stournaras said the euro zone's central banks need to come to the rescue one way or another.

"This is an obligation on their part, which they must stick to... We have up to now stuck to our promises. They must abide by theirs."

(Additional reporting by Sakari Suoninen in Frankfurt; Editing by Hugh Lawson)

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Comments (2)
2Borknot2B wrote:
“We must find a way to close this financing gap and there is absolutely no way that it can be done in a way of rollover bond or whatsoever which results in monetary financing,” Asmussen told reporters in Luxembourg. Greece’s international lenders have agreed they “could” give the country further debt relief “if” it meets fiscal targets this year (they know this is not possible), “likely” in the form of “lower financing costs or extended repayment times” for its loans. (If you wanted success for them, this would have been the strategy all along.)
“There are Greek bonds held by central banks, which had said they would roll them over but up to now have not done so,” he said. “If they do not want to implement this because they consider it monetary financing, they must find equivalent measures”. But Stournaras said the euro zone’s central banks need to come to the rescue “one way or another.” Are they going to be selling off large parts of Greece now?

Oct 14, 2013 2:06pm EDT  --  Report as abuse
dareconomics wrote:
Asmussen must say things like this for two reasons. First, Germany needs to keep up the austerity pressure, or else the Greeks will stop “reforming” the economy. Second, Germany has not yet formed a government. With sensitive coalition negotiations, it is an inconvenient time to admit that Greece needs a 4th bailout even though this is inevitable. In order to preserve its export currency, the German government and the voters will continue denying that Greece needs more money until it does. Then, it will gladly do whatever is necessary to bail Greece out.

Full link with charts, images and links:

http://dareconomics.wordpress.com/2013/10/14/around-the-globe-10-14-2013/

Oct 14, 2013 2:39pm EDT  --  Report as abuse
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