Eurozone members might have to increase their financial support for Greece if Athens and the private sector did their part to address the country’s debt crisis, Eurogroup President Jean-Claude Juncker told a newspaper.
“If Greece’s ability to sustain debt is proven and there is an overall understanding with the private sector, then the public sector will also have to ask itself if it will not provide help,” he told Austrian paper Der Standard in an interview published yesterday.
He said it was up to the European Central Bank (ECB) to decide what role it would play in contributing to debt relief via its holdings of Greek state bonds.
“The central bank is independent and it is not appropriate for the president of the Eurogroup to give public advice to the defenders of the currency,” he said.
Juncker said the private sector had to come up with a better offer for the interest rate it would accept in return for swapping Greek bonds into new ones.
“Our expectation is for Greece to have reduced its public debt to 120 percent of economic output by 2020. Probably this will not be achieved in full, but we still need steps in this direction. As a consequence that means the banks’ offer on interest rates for new Greek bonds must be improved,” he said.
He said it was still undecided whether funds left from the European Financial Stability Facility bailout fund would flow into the permanent European Stability Mechanism fund for struggling eurozone members, but he supported the idea.
Greece and its private creditors made progress on Thursday in talks on restructuring its debt, both sides said, and continued negotiations yesterday with the aim of sealing an agreement within a few days.
Athens needs a deal quickly to avert a chaotic default when a major bond redemption comes due in March. Greece’s creditors are demanding that the ECB contribute to a deal to put the country’s messy finances back on track.
The ECB, which owns about 40 billion euros (US$52.4 billion) worth of Greek bonds, is no closer to agreeing on whether or not it will take losses on the Greek bonds it owns after a late night meeting on Wednesday, eurozone central bank sources said.
Either way, a debt deal at the very latest must be clinched a month before 14.5 billion euros of bond redemptions fall due on March 20, the first source said.
If a deal is not reached by then, Greece could sink into an uncontrolled default that would trigger a banking crisis spreading contagion through the eurozone, though the ECB’s creation of nearly half a trillion euros of three-year money for the banks in December has tempered that fear.