By Jan Strupczewski
BRUSSELS Nov 30 Euro zone finance ministers
will discuss on Monday the terms of the Greek debt buy-back to
be announced that day and review a Cypriot bailout, though no
decision on Cyprus will be taken, a senior EU official said on
The Greek buy-back is a key part of a debt reduction plan
agreed by international institutional lenders to cut Greek debt
to 124 percent of GDP in 2020 from close to 190 percent seen
next year to make the debt sustainable.
The buy-back intends to cut the debt by an amount equivalent
to 11 percent of GDP, according to assumptions agreed by euro
zone finance ministers on Nov. 27. Given Greek GDP is about 200
billion euros, a 20-billion euro reduction in debt is implied.
Details are not due until Monday of the buy-back scheme and
of how much of the 63 billion euros of Greek debt still in
private hands the euro zone and Athens want to re-purchase.
Two euro zone officials said the bloc hoped Greece would be
able to repurchase at least 40 billion euros of its own bonds
from private investors. Ministers have said the price offered by
Athens for bonds under the voluntary operation should not be
higher than the closing price of Nov. 23.
Because there are various maturities trading, the price
range is from 25.15 to 34.41 cents. Euro zone ministers have
pencilled in 10.2 billion euros for buying back Greek bonds.
The senior European Union official who described plans for
Monday's meeting of euro zone finance ministers said: "We will
take stock of the terms and conditions of the buy-back operation
which, by then, will have been launched by the Greek
authorities. There will be a debriefing by the Greek minister on
the steps he will have taken by then, the time period.
"On Monday you will see it all."
The buy-back must be completed by Dec. 12, so that euro zone
finance ministers and the International Monetary Fund can review
its results on Dec. 13 and decide if it went sufficiently well
for other elements of their debt reduction plan to go ahead.
These include a reduction of interest rates on bilateral
government loans to Greece, extending loan maturities, deferral
of interest payments and the return of European Central Bank
profits on Greek bonds bought on the market.
The backing of the IMF for the Greek debt reduction plan,
and therefore its participation in the programme in its current
form, hinges on the outcome of the buy-back.
The EU official would not say what the expectations were for
the buy-back to be considered a success, but noted:
"If the expectations are missed on the downside, it depends
by how much. If it is by a small margin, personally, I would
shrug my shoulders. If by a lot, then we need to regroup.
"I have no forecast, but people would not just shrug their
shoulders, life would not just go on, it would be a very, very
challenging situation," he said. "That said, I am confident that
the debt buy-back will work as foreseen.
"There is a very clear expectation that the Greek financial
system as a whole will participate in the debt buy-back."
The ministers will also discuss a draft Memorandum of
Understanding (MoU) with Cyprus on a bailout that would enable
the country to recapitalise its banking sector and ensure
financing for the government at an affordable rate.
"We have received a draft MoU, which outlines the building
blocks for a potential programme and we will be discussing on
Dec. 3 what are the pertinent elements for the Eurogroup - the
outlook for debt sustainability, the timelines involved," the
"I would presume that an important step will be made."
A draft of the deal seen by Reuters showed Cyprus requiring
up to 10 billion euros ($13 billion) to refinance its banks,
which have been severely affected by the euro zone debt crisis
and exposure to Greece.
But for the final agreement on Cyprus, the ministers need
the results of an audit of Cypriot banks, which will show how
much money the sector will need to boost capital. This will be
ready towards the end of next week or early in the week after
that, the senior EU official said.
Cyprus has made preliminary plans to take up to 10 billion
euros for its banks, its central bank governor said on Friday.
Another 7.5 billion euros could be needed to cover its fiscal
needs, Cypriot media have reported.