HANDELSBLATT EXCLUSIVE

Greece’s Creditors Propose Debt Swap

akropolis_greece_IMF_DPA
Picture source: DPA

Greece’s international creditors – the European Commission, the European Stability Mechanism, the European Central Bank and the International Monetary Fund – are preparing a debt-relief package for the country, Handelsblatt has learned from sources who have seen the proposal.

A central element of the proposal is a debt swap in which the European Stability Mechanism, or ESM, would purchase €13 billion of Greece’s IMF loans outstanding in 2019 and beyond, using funds likely to be untapped in Greece’s bailout program to make the purchase. The ESM would offer lower interest rates and a longer maturity, providing Athens with significant relief.

The German government is not opposed to the idea in principle, according to information obtained by Handelsblatt. Berlin views the proposal as one option among many, but a decision will not be made until after the current bailout program expires in the middle of the coming year.

The ECB and the national central banks, via the euro-zone member states, could also pay back to Athens the earnings they have made from Greek bonds.

For now, Berlin wants to focus on the current bailout package and the conditions that Greece still has to implement, government sources said. Representatives of the euro-zone member states were set to meet Thursday to discuss Greece’s progress.

Greece’s international creditors are also considering other measures. One option is to extend the maturity on Greece’s debts by 10 to 15 years. The ECB and the national central banks, via the euro-zone member states, could also pay back to Athens the earnings they have made from Greek bonds.

In a meeting of the IMF board on Wednesday, fund chief Christine Lagarde made clear that Greece’s ability to sustain its debts must be secured for the IMF to continue participating in bailout programs. According to information obtained by Handelsblatt, the IMF is considering offering Greece an aid package with a one-year maturity.

Jan Hildebrand leads Handelsblatt’s financial policy coverage from Berlin and is deputy managing editor of Handelsblatt’s Berlin office. To contact the author: hildebrand@handelsblatt.com