Greece’s new government dropped calls for a write-off of its foreign debt and proposed ending a standoff with its official creditors by swapping the debt for growth-linked bonds on Monday, a week after its election on an anti-austerity platform.
Greek Minister of Finance Yanis Varoufakis, in London to reassure private investors that he was not seeking a showdown with Brussels over a new debt agreement, said the new left-wing government would spare privately held bonds from losses, a source told reporters.
The reported proposals, which included a pledge to reform the Greek economy, contrast sharply with the government’s strident vows in Athens last week to ditch the tough austerity conditions imposed under its existing bailout.
Photo: Bloomberg
Late on Monday, Varoufakis issued a statement saying that comments of his to financial investors had been misinterpreted. He gave no details, but he was widely reported in Greek media to be backing down from the government’s aim of reducing the debt.
“The government and the finance minister will not back down, irrespective of how grieved some people are by our determination,” he said in the statement.
It was not clear whether the proposals would be accepted by European heavyweight Germany, which opposes softening the terms.
Varoufakis had not discussed the swap with officials from Greece’s EU or European Central Bank (ECB) creditors, said the source, who had direct knowledge of the plans, but would not be named due to the sensitivity of the issue.
The finance minister also said he had not put a value on the swap, the source said, calling it a “work in progress.”
“These bonds held by the ECB right now can be restructured. It’s possible to turn it into perpetual bonds to be serviced, or growth-linked debt,” said the source. “It’s the same with a proportion of the other bilateral bonds held by the official sector.”
German Minister of Finance Wolfgang Schaeuble told reporters in an interview earlier on Monday that Berlin would not accept any unilateral changes to Greece’s debt program.
“We want Greece to continue going down this successful path in the interests of Greece and the Greeks, but we will not accept one-sided changes to the program,” he said at the Reuters Euro Zone Summit.
Varoufakis called his plan a “menu of debt swaps” that meant Athens would no longer call for a write-off of Greece’s 315 billion euros (US$357 billion) of foreign debt, the Financial Times reported.
“What I’ll say to our partners is that we are putting together a combination of a primary budget surplus and a reform agenda,” Varoufakis told the newspaper.
“I’ll say, ‘Help us to reform our country and give us some fiscal space to do this, otherwise we shall continue to suffocate and become a deformed rather than a reformed Greece,’” he said.
Athens planned to target wealthy tax-evaders and post primary budget surpluses of 1 to 1.5 percent of GDP, he told the paper, even if it meant his party, SYRIZA, could not fulfil all the spending promises on which it was elected.
The finance minister and new Greek Prime Minister Alexis Tsipras are touring European capitals in a diplomatic offensive to replace Greece’s bailout accord with the EU, ECB and IMF.
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