Bloomberg News

Draghi Maintains His Silence on ECB’s Role in Greek Bailout

February 22, 2012

(For more on the debt crisis, see EXT4.)

Feb. 21 (Bloomberg) -- Mario Draghi exited marathon talks in Brussels today without commenting on the European Central Bank’s role in a bailout for Greece, leaving it for finance chiefs to announce that ECB profits from Greek bond holdings will be funneled back to the debt-strapped nation.

The ECB will distribute the profits derived from its purchases of Greek bonds to national central banks, who will give the money to their governments to bolster Greece’s aid package, euro-area finance ministers said in a statement. In a new twist, governments also agreed to contribute the equivalent of the profits their national central banks make on Greek bonds in investment portfolios, the ministers said.

ECB President Draghi has yet to comment publicly on the ECB’s involvement in the wrangling over Greece even as he arranged to swap Greek bonds to avoid losses in a restructuring and sought similar treatment for the region’s 17 national central banks. While welcoming news that ministers had agreed on a second aid package for Athens as he departed the talks early today, Draghi declined to comment when asked specifically by reporters about the ECB’s stance.

It remains unclear whether national central banks’ investment portfolios are vulnerable to losses on Greek bonds.

ECB Bond Swap

Draghi was last week negotiating with Greece to swap the Greek bonds in those portfolios for similar assets that were immune from so-called collective action clauses, or CACs, which may be used in a debt restructuring, according to euro-area officials speaking on condition of anonymity.

The ECB did exactly that with the Greek securities acquired in its asset-purchase program in order to avoid losses, officials said.

Greece wanted the bonds in the portfolios to be included in a private-sector deal aimed at slicing about 100 billion euros ($132 billion) off its debt, the officials said. The central banks argued they would have dumped the bonds if they were normal investors and that they shouldn’t be forced to take losses on them.

A compromise may have been reached. Finance ministers announced today that “governments of member states where central banks currently hold Greek government bonds in their investment portfolio commit to pass on to Greece an amount equal to any future income accruing to their national central bank stemming from this portfolio until 2020.”

That will reduce Greece’s debt ratio by 1.8 percentage points and lower its financing needs by about 1.8 billion euros, they said. It is unclear whether the bonds still need to be swapped for equivalent assets that are exempt from CACs.

An ECB spokesman could not be reached for comment.

--With assistance from Jeff Black in Brussels. Editors: Jones Hayden, Patrick Henry

To contact the reporter on this story: Matthew Brockett in Brussels at

To contact the editor responsible for this story: Craig Stirling at

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