Problems with the second rescue of Greece, stalled by the intervention of the private sector

The second rescue plan of Greece is stuck and practically at the starting point in the face of the lack of progress, consensus and clarity on the participation of the private sector, a problem that the Eurozone finance ministers will try to solve on Monday in the Eurogroup meeting.

A series of meetings between representatives of the European Union (EU), the European Central Bank (ECB), the Greek government and major financial institutions holders of Greek debt under the umbrella of the Institute of International Finance (IIF) in Italy and France They have still produced tangible results.

The payment of the ransom will be distributed among banks, privatizations, and the EU and the IMF The European Commission (EC) has minimized the lack of progress with the argument that the appointments should not draw any conclusion, but it is increasingly clear that there are doubts and divergent positions in the EU on the model to follow to involve banks.

The objective is that banks, pension funds, and insurers contribute 30,000 million euros to the second rescue of some 110,000 million. The rest will come from privatizations (30,000 million) and from the EU and the International Monetary Fund (IMF).

The new bailout should cover Greece’s financial needs until the end of 2014 and include the 45 billion euros it still has from the first plan, according to sources.

A Eurozone diplomat said Friday that the private contribution could amount to only half in the end, to 15,000 million, but considered a success if it were: “15,000 million of 110,000 million is not bad,” he said.

ECB President Jean-Claude Trichet said on Thursday that “you can not assume that it’s normal (…) to have some kind of involvement from the private sector.” He reiterated that he will not accept any proposal that provokes a credit default or default rating, selective or not, an opinion that is shared, in general, in the Eurozone.

But Dutch Finance Minister Jan Kees de Jager said in an interview that voluntary participation “is unrealistic” and advocated a mandatory contribution.

“We must accept that a voluntary contribution is not realistic,” he said. “If a mandatory contribution leads to a brief and isolated rating incident (up to the level of suspension of payments), it’s not that bad.”

Meetings of the holders of economy

The risk rating agency Standard & Poor’s has warned that it will consider a “selective default” on Greece’s debt should the French model go ahead, which foresees that the bank will reinvest 70% of the securities that expire in the next three years: 50% would be used to acquire new obligations at 30 years and the remaining 20% would feed an investment fund in high-quality assets, dedicated to guaranteeing the new Greek loans.

Standard & Poor’s would consider “selective default” if the French model that seeks to reinvent 70% of the titles in three years goes ahead In Berlin, the spokesman of the Ministry of Finance, Martin Kotthaus, said that if the French model “also has this problem then we can go back to the model we proposed, “a more aggressive one that would be rejected by the agencies as well. Germany has defended a seven-year extension in the maturities of Greek bonds.

The IIF has said that several options are analyzed, including refinancing or extending the maturity of the Greek debt and the possibility of a repurchase of the debt.

The finance ministers of the eurozone will work on Monday to define the modalities and conditions, but diplomatic sources have acknowledged that the talks will probably continue until September.

On Tuesday the finance ministers of the other EU countries will join the discussions. One of the main points of the Ecofin agenda is to agree on the governments’ response to the results of the bank’s solvency tests that will be published on July 15 and the “firewall” measures that will be applied.