July 15, 2024

Euro Zone Seeks Deal on Greece by Thursday

Herman Van Rompuy, the European Council president, announced that the meeting would be held Thursday, six days later than originally expected — a reflection of the problems involved in reaching a deal.

Negotiations on the bailout have proved to be highly complex. Some diplomats have predicted that a plan that forces private investors to share the burden, as demanded by Germany, could prove more costly to taxpayers than a plan that does not.

During the 18-month Greek debt crisis, Germany has consistently played for time when faced with crucial decisions. With bailouts for Greece and other euro zone nations unpopular with the German public, Mrs. Merkel has appeared able to act only when confronted by a looming crisis.

This time she resisted a call from Mr. Van Rompuy for any meeting before sufficient groundwork had been laid to achieve a result, arguing that moving prematurely would further destabilize the financial markets.

Initially penciled in for Friday, the meeting was put off until Monday or Tuesday. But in an announcement made Friday on Twitter, Mr. Van Rompuy said he had decided to call a meeting of euro area leaders for noon on Thursday.

“Our agenda will be the financial stability of the euro area as a whole and the future financing of the Greek program,” he said. “I have asked the preparatory work to be brought forward inter alia by the finance ministries.”

Officials will be asked in the meantime to address the central outstanding issue: the extent to which private investors will be asked to share the cost of the rescue.

The European Central Bank has consistently opposed any plan that would be considered a selective default by the credit rating agencies, worrying that such an outcome would increase the risk of the debt crisis spreading from Europe’s periphery to its softer core countries, notably Spain and Italy.

Germany and the Netherlands, however, have insisted that the banks and other financial institutions must bear part of the pain to win public support.

According to officials briefed on the discussions, the conflict has created a variety of problems, not least being the possibility that if European banks sustained significant losses on their holdings of Greek bonds, they might need to be bailed out by taxpayers.

“The consequence of this is more money,” said one European Union diplomat who was not authorized to speak publicly.

Nevertheless, the uneasy compromise that is emerging will probably require private investors to take losses, said one official briefed on the discussions.

Germany had demanded that condition in exchange for its agreement that debtor countries be allowed to lighten their burdens by reducing their interest rates, lengthening the maturities of their loans and allowing the European bailout fund to finance the buyback of bonds on the secondary market.

Those measures are now seen as an important way of allowing Greece, Ireland and Portugal to escape from recession and return to growth.

Article source: http://feeds.nytimes.com/click.phdo?i=a148f28a71ccbe0d6ba63fdd8f87aeb2

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