The European Central Bank is expected to respond on Thursday afternoon to the proposal of German Finance Minister Wolfgang Schauble for the new adjustment of the Greek debt. The board of ECB, meeting on Thursday, will discuss the proposal for a new aid package, which provides the participation of private institutional investors by 1/3 in roll over of Greek debt maturing in 2012-2014.
ECB’s position, as expressed by both Jean-Claude Trichet and his successor Mario Draghi, is that private investors could not participate unless it is a genuinely voluntary agreement on holding of Greek bonds.
The distance between Schaeuble’s proposal and Trichet’s position refers to who will provide the conditions for a genuinely voluntary participation and not indirectly forced.
In such a case, Mario Draghi said on Wednesday, a destructive tsunami would follow both in Greece and other Eurozone countries. During Angela Merkel’s visit in Washington several obstacles have been overcome, as U.S. agreed that a sequel of Lehman Brothers case should be avoided at all costs. Washington believes that in the case of a Greek default, the second package of quantitative easing (QE2) could be at risk.
However, the European Commission and the French government stand by ECB’s position, while Wolfgang Schauble seems willing to negotiate terms that would rule out the possibility of an involuntary participation.
On Wednesday, Credit Agricole CEO said that the French bank would participate in a plan of roll over of Greek bonds, provided that European authorities would guarantee the conditions.
It should be noted that executives of JP Morgan, Credit Suisse and RBS seem to examine taking part in the plan, albeit with reservations about the technical part of the case.
However, German bankers seem more cautious and anticipate the final version of the proposal for the roll over of Greek debt through the holding of bonds by seven years.
In any case, yesterday’s teleconference between Eurogroup’s ministers confirmed that a formal debate on the new package should be approved even “in principle” at the European Summit, after troika reported that Greece won’t be able to access the markets in 2012 and that Greek debt is unsustainable.
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