July 1 (Bloomberg) -- Greece may receive as much as 85billion euros ($124 billion) in new financing, including acontribution from private investors, in a second bailout aimedat preventing default and ending the euro-region’s debt crisis,according to an Austrian Finance Ministry official. The new package will total 190 billion euros to 195 billioneuros, including the 110 billion euros from the original rescuea year ago, Thomas Wieser, head of the ministry’s economicpolicy and financial markets department, said at a briefing withFinance Minister Maria Fekter in Vienna late yesterday. The International Monetary Fund will put up 30 percent ofthe new funds, with euro-region countries and private investorscontributing the remaining 70 percent, Wieser said. Europe’s latest attempt to prevent Greece’s fiscal frailty from infecting the entire region -- and the world -- comes afterPrime Minister Finance Minister George Papaconstantinou securedpassage of 78 billion euros of additional budget cuts andrevenue measures needed to meet the targets of the original bailout. Greece now needs more funds as record bond yields hasleft it locked out of markets and unable to meet the originalplan’s goal of selling 30 billion euros of debt next year. The yield premium that investors demand to buy 10-yearGreek bonds over comparable German bunds rose 2 basis points to13,325 basis points.
Private Investors : While German and French official have signaled a target of as much as 30 billion euros from private investors, “one can’t say reliably how much the private sector will contribute,”Fekter said. Any involvement has to be voluntary and can’t beallowed to trigger a credit default, she said. Holders of Greek bonds are being asked to contribute to theplan by agreeing to roll over debt maturing in the next threeyears into longer-maturity bonds. Fekter said that she expects to hear proposals on private investor involvement in the coming days. Euro-region finance ministers have scheduled a conference call for tomorrow to discuss the issue and the release of the fifth installment of aid from last year’s bailout. Greece needs that 12 billion-europayment to meet a 6.6 billion-euro bond maturity in August. German banks have agreed to roll over Greek bonds maturingthrough 2014, which amount to about 2 billion euros, FinanceMinister Wolfgang Schaeuble said yesterday in Berlin. The country’s so-called bad banks will provide 1.2 billion euros aswell, he said.
Averting ‘Meltdown’: Deutsche Bank AG Chief Executive Officer Josef Ackermann, at a conference in Berlin yesterday with Chancellor Angela Merkel, predicted that financial companies would contribute to help avert a “meltdown.” German and French lenders are the biggest foreign holders of Greek debt. Under a French proposal, bondholders would agree to rollover 70 percent of their debt maturing through mid-2014 into new30-year Greek bonds with the principal on the new debtguaranteed through Greece investing in zero-coupon bonds ofsimilar maturity. Under a second option, investors would rollover 90 percent of their debt into new five-year bonds with noguarantee. The new bailout program, which should run from mid-2011 forthree years, has to be “imagined as a cash-on-deliveryagreement,” Wieser said, adding that the dates of paying outinstallments haven’t yet been set. Quarterly reviews of Greece’sprogress by officials of the EU, IMF and European Central Bankthat were part of the original package will continue under the new plan, Fekter said.
Aid Review: “Before every payments there will be a discussion of thefinance ministers to see if the program is on track and whetherthe Greeks are still doing their part,” and “this is anincentive for the Greeks to make the necessary politicaldecisions and a political and economical guarantee for the 16donor countries --or how many that may be -- that their money isadministered as safely as possible,” Wieser said. The first payment under the new program will probably takeplace in September, and may be of a similar size to the 12billion-euro July installment, he said.
Private Investors : While German and French official have signaled a target of as much as 30 billion euros from private investors, “one can’t say reliably how much the private sector will contribute,”Fekter said. Any involvement has to be voluntary and can’t beallowed to trigger a credit default, she said. Holders of Greek bonds are being asked to contribute to theplan by agreeing to roll over debt maturing in the next threeyears into longer-maturity bonds. Fekter said that she expects to hear proposals on private investor involvement in the coming days. Euro-region finance ministers have scheduled a conference call for tomorrow to discuss the issue and the release of the fifth installment of aid from last year’s bailout. Greece needs that 12 billion-europayment to meet a 6.6 billion-euro bond maturity in August. German banks have agreed to roll over Greek bonds maturingthrough 2014, which amount to about 2 billion euros, FinanceMinister Wolfgang Schaeuble said yesterday in Berlin. The country’s so-called bad banks will provide 1.2 billion euros aswell, he said.
Averting ‘Meltdown’: Deutsche Bank AG Chief Executive Officer Josef Ackermann, at a conference in Berlin yesterday with Chancellor Angela Merkel, predicted that financial companies would contribute to help avert a “meltdown.” German and French lenders are the biggest foreign holders of Greek debt. Under a French proposal, bondholders would agree to rollover 70 percent of their debt maturing through mid-2014 into new30-year Greek bonds with the principal on the new debtguaranteed through Greece investing in zero-coupon bonds ofsimilar maturity. Under a second option, investors would rollover 90 percent of their debt into new five-year bonds with noguarantee. The new bailout program, which should run from mid-2011 forthree years, has to be “imagined as a cash-on-deliveryagreement,” Wieser said, adding that the dates of paying outinstallments haven’t yet been set. Quarterly reviews of Greece’sprogress by officials of the EU, IMF and European Central Bankthat were part of the original package will continue under the new plan, Fekter said.
Aid Review: “Before every payments there will be a discussion of thefinance ministers to see if the program is on track and whetherthe Greeks are still doing their part,” and “this is anincentive for the Greeks to make the necessary politicaldecisions and a political and economical guarantee for the 16donor countries --or how many that may be -- that their money isadministered as safely as possible,” Wieser said. The first payment under the new program will probably takeplace in September, and may be of a similar size to the 12billion-euro July installment, he said.
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