Greece Needs Additional $78B in Funding: Report
Greece will need an additional 55 billion euros in official funding until 2014 under a second bailout package under discussion among international lenders, a senior EU source close to the negotiations said on Thursday.
That is slightly less than the figures cited by European officials in recent weeks.
The three-year programme would involve 115 billion euros in new funding beyond the 57 billion euros still to be paid out under last year’s first rescue plan, he said.
Further funding is contingent on the Greek parliament adopting a more drastic five-year austerity programme next week to win the release of 12 billion euros in EU/IMF aid and avert potential bankruptcy in mid-July.
Of the new total, Greece is committed to raising 30 billion euros in privatisation revenues, and private sector banks and insurers are expected to provide about 30 billion euros through a voluntary bond rollover.
“Our working hypothesis is to share the burden with two-thirds met by the EU and one-third IMF funding,” the source said.
However, he noted that the International Monetary Fund’s share of the original 110 billion euro Greek bailout agreed last year was 30 billion euros — just 27 percent of the total.
On the same basis this time, the IMF’s share could be as little as 15 billion euros, the source said.
That could help assuage concern among non-European members of the IMF board at pouring yet more money into Greece when there are serious doubts about the sustainability of its 340 billion euro debt mountain — 150 percent of economic output.
The EU source said first indications from talks this week at a national level between euro zone central banks and commercial banks and insurers with exposure to Greece suggested broad support for a voluntary rollover of maturing debt.
Euro zone officials should have a clearer idea of the likely volume of bond rollovers in late August after two redemptions in the next two months, he said. Much of the money will come from Greek banks which have little choice since they would be hardest hit by a potential Greek sovereign default.
Officials of the euro zone’s rescue fund are trying to convince credit rating agencies that voluntary commitments made by private bondholders at national level without central orchestration from Brussels should not be treated as a “selective default”, potentially setting off a chain reaction of turmoil in capital markets.
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