(Adds quotes from Reynders, details throughout)
FRANKFURT/WROCLAW, Poland, Sept 16 Less than 75
percent of private sector creditors have signalled they will
take part in a scheme to buy back Greek debt, far less than the
90 percent target set by Greece, a shortfall that could
jeopardise the euro zone's second bailout package for Athens.
Several sources familiar with the buyback process told
Reuters between 70 and 75 percent of the banks, insurance
companies and other private sector holders of Greek debt had
said they would take part in the scheme, a critical element in
the new, 109-billion-euro package of support for Greece.
The shortfall will now either have to be made up for by
other euro zone governments, or creditors that have signalled
they will take part may have to increase their contribution,
which already foresees a 21 percent reduction in the value of
their holdings as part of the exchange.
Belgian Finance Minister Didier Reynders played down the
potential hurdle created by the lower-than-expected
participation, saying if necessary the euro zone's EFSF bailout
fund could be used to make up the difference.
"We should have the final figures by mid-October and if by
then this figure of 70-75 percent is confirmed, we'll have to
look at the tools available to react," he told reporters in
Wroclaw, where EU finance ministers were meeting informally.
"I want to remind you that by then the EFSF will have been
strengthened," he said.
The European Financial Stability Facility will have gained
new powers by mid-October, allowing it to intervene on
secondary bond markets, extend credit lines preemptively to
at-risk governments and help recapitalise banks.
"It's one of the solutions. If the private sector does not
take up its responsibilities, somebody will have to," Reynders
told Reuters, referring to euro zone governments.
Alternatively, Athens has indicated that it has funds set
aside for banks that could be used to make up the shortfall.
Greece has already been granted 110 billion euros of
bilateral loans by the EU and IMF, the seventh tranche of which
is expected to be paid in mid-October if EU/IMF/ECB inspectors
determine that Athens has met its budget-cutting targets.
At the same time, euro zone countries have agreed to grant
Greece a second bailout of 109 billion euros, as long as there
is also a "significant" private sector participation in the
At a summit on July 21, private sector creditors,
represented by the Institute of International Finance, agreed
to take part and help reduce Greece's debt burden by around 37
billion euros via a debt buyback and bond exchange.
The IIF has said it will now go back to banks and see if it
can secure further support to raise the participation rate
closer to the 90 percent target.
(Reporting By Philipp Halstrick, Julien Toyer and Illona
Wissenbach; Writing by Luke Baker and Edward Taylor; Editing by