A debt crisis summit meeting of European leaders scheduled for October 18 was pushed back to October 23 amid a disagreement about the amount of Greek debt to be written down. While the original plan in July called for a 21% reduction, now there is talk of a 50-60% writedown instead—and Germany is calling for even larger losses.
Bloomberg reported Tuesday that Jean-Claude Juncker, prime minister of Luxembourg, said in an interview that discussions on Greek sovereign debt writedowns could result in amounts considerably more than anticipated; asked about 50-60% loss on holdings, he said. “we’re talking about even more,” without providing additional details. Guy Schuller, a spokesman for Juncker, said later that Juncker meant euro-area officials were discussing investor losses on their Greek holdings exceeding 21%.
Belgian Prime Minister Yves Leterme was quoted saying, “It is a very sensitive item. You can’t at every European Council change the percentages and bring supplementary problems to banks.” Nevertheless, it would appear that there is a strong possibility that the July agreement will be renegotiated. Leterme said that an agreement to recapitalize banks was necessary before such an action is taken.
Even as Germany is pushing for a more drastic writedown of Greek debt, the European Central Bank (ECB) is pushing back. The central bank inserted a comment urging that all parties “fully implement all aspects” of the July agreement in its monthly policy statement last week as a warning to Germany, according to an unidentified official.
Greece awaits delivery of its second bailout package, which it says it needs in order to meet November obligations. That delivery, however, is contingent on the approval of members of the so-called “troika”—inspectors from the ECB, European Union (EU) and International Monetary Fund (IMF), who are expected to finish their review of Greece’s situation on Tuesday, despite Greek Finance Minister Evangelos Venizelos’ statement Monday that some “technical issues” still need resolution.
Julian Callow, chief European economist at Barclays Capital in London, was quoted saying “It is looking as if the July 21 agreement just isn’t sufficient and