Cyber Monday Deal: Up to 60% off InvestingProCLAIM SALE

Greece seeks negotiations on ECB bond repayment

Published 28/02/2015, 11:25
© Reuters. Greek Finance Minister Varoufakis arrives for a government meeting at the parliament in Athens

ATHENS (Reuters) - Greece called into question on Saturday a major debt repayment it must make to the European Central Bank this summer, after acknowledging it faces problems in meeting its obligations to international creditors.

Finance Minister Yanis Varoufakis said Athens should negotiate with the ECB on 6.7 billion euros in Greek government bonds held by the Frankfurt-based bank that mature in July and August.

Varoufakis did not say what he hoped to achieve in any talks, but he accused the ECB of making a mistake in buying the bonds around the time Greece had to take an EU/IMF bailout in 2010.

"Shouldn't we negotiate this? We will fight it," he said in an interview with Skai television. "If we had the money we would pay ... They know we don't have it."

The government of leftist Prime Minister Alexis Tsipras promised to honour all its debt obligations when it struck a deal with the euro zone last week that extended Greece's bailout programme for four months.

But Athens will get no more money until the European Commission, ECB and International Monetary Fund have approved in detail its economic plans during the four-month period.

With tax revenue falling far short of target last month and an economic recovery faltering, the state must repay an IMF loan of around 1.6 billion euros in March and find 800 million in interest payments in April. It then needs about 7.5 billion in July and August to repay the bonds held by the ECB and make other interest payments.

The ECB bought the bonds on the secondary market under its Securities Markets Programme (SMP) which aimed to reduce borrowing costs for troubled southern European governments during the euro zone debt crisis.

However, Greece was frozen out of international debt markets, and more than four years later is still unable to fund itself commercially apart from limited issues of short-term treasury bills.

Varoufakis, who has staged a media blitz in recent days to sell the euro zone deal to the Greek people, singled out former ECB President Jean-Claude Trichet for criticism.

"One part of the negotiations will be on what will happen to these bonds which unfortunately and wrongly Mr Trichet bought," he said. "I see it as a mistake - but the ECB did this with the aim of keeping us in the markets in 2010. They failed."

Varoufakis argued that if the bonds had remained in investors' hands, their value would have been cut by 90 percent under a restructuring of Greece's privately held debt in 2012, reducing the burden on the state.

The ECB bought the bonds at a deep discount and made large profits because their value rose as the euro zone debt crisis eased. Under Greece's second bailout deal, these profits were due to be returned to Athens to help it repay debt.

© Reuters. Greek Finance Minister Varoufakis arrives for a government meeting at the parliament in Athens

Athens received a partial payment in 2013 but euro zone countries are withholding a further 1.9 billion euros pending the review of Greece's economic plans. Varoufakis wants this money sent directly to the IMF to meet the March payment.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.