Greece, Cyprus center stage in eurozone meeting
Posted: 12/03/2012 at 11:42 am
By: By DON MELVIN
Details of a plan for Greece to reduce its heavy debt by buying some of it back at bargain prices will be presented Monday to finance ministers from the 17 European Union countries that use the euro.
The ministers in Brussels will also examine a draft of the conditions that might accompany a bailout for the Mediterranean island nation of Cyprus. The size of that bailout will not be known, however, until an audit of the country's banks is completed, and no decision is expected Monday.
Help for the banking sector will be an important component of the Cypriot bailout.
"The structure of the Cypriot banking system will not be the same in a year's time, because it is one of the causes of the crisis," an EU official said late last week. He spoke only on condition of anonymity because of EU rules.
Greece is currently fleshing out details of the bond buyback program that is intended to help lower its debt load. The country has announced that holders of Greece's bonds have until Friday to register their interest in participating, but details of the program have so far been vague.
The country's Public Debt Management Agency said Monday that the buyback should be completed by Dec. 17.
The program is a vital part of a plan to release about (EURO)44 billion ($57 billion) in bailout loans that Greece needs to stay afloat. The EU official would not reveal what the expectations for the buyback are other than to say, "They are substantial."
The official said he was confident the program would succeed. But he added that, if it proves significantly less successful than hoped, "it will be a very, very challenging situation."
As a condition for continuing to participate in Greece's bailout, the International Monetary Fund has made clear that there must be in place a credible plan to reduce the country's debt to sustainable levels.
Besides the debt buyback, Greece is pursuing a program of spending cuts, tax hikes and privatizations.
German Finance Minister Wolfgang Schaeuble said that pressure needed to be kept on Greece to reduce its public debt.
"The Greeks have already achieved a lot," Schaeuble said. "They need to continue on that path."
French Finance Minister Pierre Moscovici said on his way into the meeting that the officials would also exchange views on proposals to create a greater economic and monetary union.
"We really want to move forward with integration of the eurozone," he said.
On Tuesday, finance ministers from all 27 EU countries will consider a range of issues related to stronger central governance, including unified banking supervision for the bloc.
Raf Casert contributed to this report. Don Melvin can be reached at http://twitter.com/Don-Melvin.