Euro zone governments may have to provide up to €145 billion to Athens under a second emergency loan programme for Greece, EU sources said today, €15 billion more than previously expected.
The extra funds are mainly required to help recapitalise the Greek banking sector once a deal is struck to write down the value of bonds owned by private-sector creditors, the sources said.
"It's mostly because of recapitalisation needs of Greek banks due to PSI," one euro zone official said, referring to bondholder losses termed private sector involvement.
Officials noted the €145 billion was a rough number rather than a precise sum.
"The agreement of the leaders in October was for €100 billion in financing for Greece and €30 billion as a sweetener for the debt swap for the private sector. Now it could be €115 billion plus €30 billion," the second source said.
But officials said the increase in size of the contribution of euro zone taxpayers to the second Greek financing package was not a done deal yet as there was resistance to the idea from some euro zone countries.
"It is difficult to tell if this will be accepted," a third euro zone official said of the higher public financing.
Negotiations with private sector creditors to take a 70 per cent net-present-value writedown on their holdings, cutting Greece's debts by around €100 billion, are close to being concluded.
But it remains unclear how much of a writedown the official sector - the European Central Bank (ECB) and national euro zone central banks - may have to take on their holdings of Greek government bonds in order to make Greece's overall debt burden sustainable.
Euro zone officials said the involvement of any of the ECB's Greek holdings in any Greek debt restructuring were still not decided and that talks were in a "delicate" phase.
The IMF says Greece's debts must be cut from around 160 per cent of GDP now to 120 per cent of GDP by 2020 in order to be sustainable. The conclusion of PSI will help bring the debts close to 120 per cent by 2020, but not all the way there.
As a result, there is expected to be a need for the official sector to take a hit, in addition to the extra funds from euro zone governments, sources said.
Reuters
