Greek Options on Repaying ECB Bonds Said to Include Bills, Delay

Greek Prime Minister Antonis Samaras
Antonis Samaras, prime minister of Greece. Photographer: Chris Ratcliffe/Bloomberg

Options to tide Greece past the looming redemption of its bonds held by the European Central Bank include delaying the payment and having the cash-strapped country sell bills, two European Union officials said.

Two Greek bonds on the ECB’s books totaling 3.1 billion euros ($3.8 billion) mature on Aug. 20, Bloomberg data show. The central bank insists on being repaid in full, unlike the investors who were forced to take losses in this year’s Greek debt restructuring.

Euro-area finance ministers will on July 20 consider ways to save Greece from a market-quaking non-payment without easing the pressure on Prime Minister Antonis Samaras’s new government to keep overhauling the economy, said the officials, who asked not to be named because the talks are private.

European governments are determined to avoid a reckoning with Greece, which triggered the debt crisis almost three years ago, while separate negotiations take place over aid for Spain’s banks. A downgrade today by Moody’s Investors Service of Italy’s credit rating added to the fiscal concerns plaguing the 17-nation euro area.

Greece is counting on an “intermediate solution” to keep it solvent through August, Finance Minister Yannis Stournaras said in Brussels on July 10 after attending his first meeting of European finance chiefs.

Greek Cash

European governments first need to have a closer look at Greece’s accounts, remembering that prior cash-flow squeezes ended with it coming up with payments in time, one official said. One option would be an unspecified form of bridge financing, the official said.

Greece could also sell three-month Treasury bills, the other official said. The country hasn’t been shut out of short-term debt markets, announcing today that the next regular sale of 1.25 billion euros in 13-week bills will take place on July 17.

A final option is for the ECB to consent to giving Greece an extra month to pay up, the officials said. An ECB spokeswoman declined to comment.

The ECB is the sole holder of the first, 551 million-euro bond due in August. The central bank owns 97.5 percent of the second, 2.6 billion-euro bond, with the rest held by the European Investment Bank and the European Union.

One cause of next month’s wrangle over the bond redemption was a decision by European creditors and the International Monetary Fund to withhold a scheduled 4.2 billion-euro disbursement due in June until elections yielded a stable Greek government committed to the reform program.

Greece’s redemption won’t dominate the July 20 meeting of finance ministers. The main purpose is to sign off on aid of as much as 100 billion euros for Spain’s banks. The consultations are likely to be by teleconference, though an in-person meeting in Brussels isn’t ruled out, officials said.

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