Ministers pogen conflict ECB en Berlijn bij te leggen (en)
EUOBSERVER / BRUSSELS - European finance ministers are to hold an emergency meeting on Tuesday in an attempt to resolve the now quite public dispute between the German finance ministry and the European Central Bank over a second bail-out for Greece.
At issue in the session will be the question of the degree of participation of private sector involvement.
Germany has concluded that a restructuring of Greek debt is inevitable and that it is better to be a controlled default than a chaotic one. Furthermore, Berlin believes it is not domestically politically viable to deliver further aid to Greece without significant involvement of private bondholders.
Last week, German finance minister Wolfgang Schaeuble said in a letter leaked to the press, that the holders of Greek debt should be forced to extend the maturities of their debt by seven years to prevent a bankruptcy.
The ECB for its part, the holder of more substantial sums of Greek debt than Germany, has been publicly battling the Berlin option, backing a plan that would see a debt rollover in which bondholders voluntarily buy new bonds giving Greece longer periods to pay back its debt - a softer option, known as the ‘Vienna Initiative', after a similar scheme from three years ago that resolved eastern European banking insolvencies and their related Austrian exposure.
The ministers do not expect to secure an agreement between the two sides, but rather lay the groundwork for a deal that can be cobbled together by finance ministers at a scheduled meeting in Luxembourg on 20 June.
France for its part, also with greater exposure to Greek debt than Germany, leans more towards the ECB option.
The European Commission too appears to be siding with the central bank, with economy commissioner Olli Rehn i saying on Tuesday in an interview with Sueddeutsche Zeitung that a Vienna-Initiative-type option was being prepared.
Dutch finance minister Mark Rutte i appeared to come out in favour of the German plan on Monday, supporting stronger involvement of private bondholders.
The leaders of France and Germany are to meet on Friday to resolve their differences.
In related news, Greece saw its credit rating downgraded once again on Monday by the Standards and Poors agency.
S&P dropped its rating three notches to triple C, one notch above D, or default.
Athens lashed out at the move.
"The decision ignores the intense consultations taking place currently between the same institutions and the IMF aimed at designing a viable solution that will cover the financing needs of Greece in the coming years," the Greek finance ministry said in a statement.
"The Greek government has shown its willingness and capacity in the recent past to meet important fiscal targets and last week submitted to parliament a Medium-Term Fiscal Strategy to be passed by the end of June that outlines detailed, specific fiscal commitments that will ensure the sustainability of Greek sovereign debt."
Meanwhile Greek citizens, demonstrating in Syntagma square in front of the parliament since 25 May, announced they are to blockade the parliament 15 June in an attempt to prevent the government from passing the mid-term plan.