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Bloomberg News

ECB Said to Consider Helping Greece With Holdings

November 26, 2012

The European Central Bank is considering new ways to help reduce Greece’s funding gap by using the Greek debt in its investment portfolios, three euro- area officials said.

The national central banks of the euro area hold Greek bonds in their investment portfolios and agreed in February to give any profits back to Greece. The issue has been reopened and the ECB is now looking at options including rolling over the holdings or allowing the Greek government to buy them back, the officials said yesterday on condition of anonymity.

There are between 10 billion euros ($13 billion) and 15 billion euros in the portfolios, one official said. The amount saved by Greece would be considerably less than the overall value of the holdings, the person said. An ECB spokesman declined to comment on whether such plans are under discussion.

Euro-area finance ministers were meeting in Brussels last night in the third attempt this month to plug Greece’s funding shortfall. The impasse is holding up the next bailout payment to Athens and, as they have done so often during the sovereign debt crisis, governments are once again turning to the ECB for help. ECB President Mario Draghi attended last night’s meeting.

Greece may need as much as 32.6 billion euros in extra financing through 2016, according to an assessment by the country’s creditors obtained by Bloomberg News. Plans to give Greece two more years to meet deficit-reduction targets would open up financing gaps of 15 billion euros through 2014 and 17.6 billion euros in 2015-2016, the assessment shows.

Profit Distribution

European leaders agreed in February to help Greece with any profits on ECB Greek bond holdings, which would normally be distributed via national central banks to their respective governments. Now they are looking for ways to squeeze more value from the bond holdings, three officials said.

Debt rollovers or buybacks may be more controversial because they could open the central bank to accusations of monetary state financing. Germany’s Bundesbank has already criticized the ECB’s new bond-purchase plan as a risk to its independence and credibility.

A rollover would reduce Greece’s immediate funding needs, while a buyback would likely see the government pay the ECB the price it paid, which would be less than face value, economists have said.

Greek Collateral

Greece needs to close the funding gap to meet the terms of its bailout and receive the next tranche of funds. Should that happen, the ECB will start accepting Greek government bonds as collateral again, helping Greek banks to reduce their reliance on emergency liquidity and refinance at a cheaper rate, two officials said.

Greek government bonds became ineligible as collateral in July when an agreement that had been struck before the country restructured its debt expired. Since then, banks using such bonds to obtain funding have had to tap Emergency Liquidity Assistance from their national central banks at a higher cost.

The ECB said at the time it would reassess the eligibility of Greek government bonds once the so-called troika of the ECB, the European Commission and the International Monetary Fund completed its review.

To contact the reporters on this story: Jeff Black in Helsinki at; Stefan Riecher in Berlin at; Gabi Thesing in London at

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

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