The European Central Bank will probably help plug a financing gap in the Greek bailout that euro-area finance officials will consider this week, ING Group NV senior economist Carsten Brzeski said.
Even with the 130 billion-euro ($172 billion) aid package and a debt writeoff with private creditors, Greece may need as much as 15 billion euros to meet debt-reduction targets, Brussels-based Brzeski said today by phone.
ECB President Mario Draghi rejected selling Greek bonds held by the central bank to Europe’s temporary bailout fund at a loss, saying it would violate the prohibition on monetary financing of governments. Speaking hours before a meeting of euro-area finance ministers Feb. 9. he declined further comment.
“I cannot say anything on how our holdings of Greek bonds will be treated,” Draghi said. Talk of the ECB sharing losses is “unfounded” and “it is not our intention to violate” the prohibition on monetary state financing.
Given the options of additional taxpayer funding or an intervention by the ECB, “the most likely one is that the ECB will take part in foregoing the profits,” Brzeski said. The extra funding will be needed to meet a goal to reduce Greek public debt to 120 percent of economic output by 2020.
Euro-area finance ministers declined to ratify the 130 billion-euro Greek bailout package last week, saying Greece must first put its verbal commitments into law. They’ll meet again in Brussels in two days.