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| Euro Zone Finance Ministers Meet, Again, to Grapple With Greece | |
| (about 4 hours later) | |
| BRUSSELS — They meet yet again. And once more, the agenda will be dominated by a looming deadline on the unfinished business of Greece. | BRUSSELS — They meet yet again. And once more, the agenda will be dominated by a looming deadline on the unfinished business of Greece. |
| Euro zone finance ministers are to gather in Brussels on Monday for their fourth meeting in four weeks. Last week, they hashed out a plan under which Greece can try to unlock a long-overdue bailout loan installment. The country needs the money desperately to avoid bankruptcy, to pay wages and pensions and to carry out economic overhauls demanded by its international creditors. | Euro zone finance ministers are to gather in Brussels on Monday for their fourth meeting in four weeks. Last week, they hashed out a plan under which Greece can try to unlock a long-overdue bailout loan installment. The country needs the money desperately to avoid bankruptcy, to pay wages and pensions and to carry out economic overhauls demanded by its international creditors. |
| The finance ministers are expected to vet Greece’s planned response to a central provision of that plan: a buyback of some of the Greek bonds held by investors, at a discount, as a way to reduce its staggering debt load. | The finance ministers are expected to vet Greece’s planned response to a central provision of that plan: a buyback of some of the Greek bonds held by investors, at a discount, as a way to reduce its staggering debt load. |
| Greece has until Dec. 13 to make that happen, if it hopes to receive its next round of bailout money. | Greece has until Dec. 13 to make that happen, if it hopes to receive its next round of bailout money. |
| With the Greek economy continuing to fall, the meeting of finance ministers is coming against a backdrop of grim new data for the euro region as a whole. Despite an optimistic forecast Friday from the European Central Bank president that the euro zone would emerge from recession sometime in the second half of next year, the nearer-term data indicate that things may get worse before they possibly get better. | With the Greek economy continuing to fall, the meeting of finance ministers is coming against a backdrop of grim new data for the euro region as a whole. Despite an optimistic forecast Friday from the European Central Bank president that the euro zone would emerge from recession sometime in the second half of next year, the nearer-term data indicate that things may get worse before they possibly get better. |
| Figures released Friday showed euro zone unemployment rising to a new high in October, with nearly 19 million people — 11.7 percent of the 17-nation currency bloc’s work force — without jobs. | Figures released Friday showed euro zone unemployment rising to a new high in October, with nearly 19 million people — 11.7 percent of the 17-nation currency bloc’s work force — without jobs. |
| Greece’s international lenders froze aid in June because they perceived the government to be dragging its heels on fulfilling the terms of its bailout program. Since then, the country has accelerated the economic revamping and budget cuts that creditors have demanded. | Greece’s international lenders froze aid in June because they perceived the government to be dragging its heels on fulfilling the terms of its bailout program. Since then, the country has accelerated the economic revamping and budget cuts that creditors have demanded. |
| But the economic outlook for Greece has worsened significantly in the interim — some critics blame the austerity program, in part — prompting the International Monetary Fund to put pressure on lenders, including Germany, to relieve some of the debt burden. | But the economic outlook for Greece has worsened significantly in the interim — some critics blame the austerity program, in part — prompting the International Monetary Fund to put pressure on lenders, including Germany, to relieve some of the debt burden. |
| A centerpiece of those efforts, agreed upon last week, is the debt buyback. The plan is for the authorities in Athens to borrow European funds to purchase Greek bonds that are already trading at a deep discount from their face value. | A centerpiece of those efforts, agreed upon last week, is the debt buyback. The plan is for the authorities in Athens to borrow European funds to purchase Greek bonds that are already trading at a deep discount from their face value. |
| The buyback plan may have allayed fears of an imminent Greek default, but how well it will work remains to be seen. Some in the financial sector have complained about the prospect of having to sell bonds at fire-sale prices. | The buyback plan may have allayed fears of an imminent Greek default, but how well it will work remains to be seen. Some in the financial sector have complained about the prospect of having to sell bonds at fire-sale prices. |
| The Market Monitoring Group of the Institute of International Finance, a global association of banks and other financial institutions, said last week that it was “critical that any buyback be conducted on a purely voluntary basis.” But Yannis Stournaras, the Greek finance minister, warned Greek banks holding many of the bonds that participation was a “patriotic duty.” | The Market Monitoring Group of the Institute of International Finance, a global association of banks and other financial institutions, said last week that it was “critical that any buyback be conducted on a purely voluntary basis.” But Yannis Stournaras, the Greek finance minister, warned Greek banks holding many of the bonds that participation was a “patriotic duty.” |
| But unless Greece reduces its debt, the I.M.F. could still refuse to approve aid. That would probably mean another flurry of emergency meetings to draw up yet another plan. | But unless Greece reduces its debt, the I.M.F. could still refuse to approve aid. That would probably mean another flurry of emergency meetings to draw up yet another plan. |
| In a sign that at least some investors are eager to sell back their Greek bonds, if the price is right, some big hedge funds have been accumulating the bonds on the open market. | In a sign that at least some investors are eager to sell back their Greek bonds, if the price is right, some big hedge funds have been accumulating the bonds on the open market. |
| Those funds, including Third Point and Brevan Howard, are betting that to make the buyback succeed — so Athens can get its next loan installment — the Greek government will have to meet their price demands. On the open market, the bonds in question are trading at about 30 cents on the euro — in other words, about 30 percent of their face value. The most aggressive hedge funds are insisting that they will not sell for less than 35 cents on the euro. | Those funds, including Third Point and Brevan Howard, are betting that to make the buyback succeed — so Athens can get its next loan installment — the Greek government will have to meet their price demands. On the open market, the bonds in question are trading at about 30 cents on the euro — in other words, about 30 percent of their face value. The most aggressive hedge funds are insisting that they will not sell for less than 35 cents on the euro. |
| That raises a risk that investors will push the price up to a point at which it does not make economic sense for Greece to complete the buyback. | That raises a risk that investors will push the price up to a point at which it does not make economic sense for Greece to complete the buyback. |
| “There is a limited amount of money to do this,” Mr. Stournaras said in an interview Saturday. “But in the end, I do think it will be successful.” | “There is a limited amount of money to do this,” Mr. Stournaras said in an interview Saturday. “But in the end, I do think it will be successful.” |
| To seal the debt overhaul deal last week, after three late-night, marathon meetings in three weeks, Christine Lagarde, managing director of the I.M.F., had to fight to persuade reluctant finance ministers like Wolfgang Schäuble of Germany. She argued that Greece was sinking so far that without immediate relief, it might never repay its loans. | To seal the debt overhaul deal last week, after three late-night, marathon meetings in three weeks, Christine Lagarde, managing director of the I.M.F., had to fight to persuade reluctant finance ministers like Wolfgang Schäuble of Germany. She argued that Greece was sinking so far that without immediate relief, it might never repay its loans. |
| Mr. Schäuble declined to go along with a relief plan until a way was found to avoid the politically unpalatable step of forgiving Greece’s loans. Besides the debt buyback, the revamped plan included extending the payback dates for some of the debt held by other euro zone governments. Central banks in countries that use the euro also agreed to return to Greece any profits made on Greek bonds purchased by the E.C.B. | Mr. Schäuble declined to go along with a relief plan until a way was found to avoid the politically unpalatable step of forgiving Greece’s loans. Besides the debt buyback, the revamped plan included extending the payback dates for some of the debt held by other euro zone governments. Central banks in countries that use the euro also agreed to return to Greece any profits made on Greek bonds purchased by the E.C.B. |
| On Friday, the German Parliament approved the new relief plan by a wide margin, a sign of continuing fears about the future of the euro zone if Greece defaults. But the approval carried a political cost for the German chancellor, Angela Merkel, as nearly two dozen legislators in her own Christian Democrat party voted against the measure. | On Friday, the German Parliament approved the new relief plan by a wide margin, a sign of continuing fears about the future of the euro zone if Greece defaults. But the approval carried a political cost for the German chancellor, Angela Merkel, as nearly two dozen legislators in her own Christian Democrat party voted against the measure. |
| Greek debt stands at about 175 percent of the country’s gross domestic product and is expected to rise to 190 percent next year. In 2014, it could climb as high as 200 percent. The deal struck last week, including the buyback, is aimed at reducing debt to 124 percent of G.D.P. by the end of the decade. | Greek debt stands at about 175 percent of the country’s gross domestic product and is expected to rise to 190 percent next year. In 2014, it could climb as high as 200 percent. The deal struck last week, including the buyback, is aimed at reducing debt to 124 percent of G.D.P. by the end of the decade. |
| Much of the attention at the Monday meeting will focus on Mr. Stournaras, the Greek finance minister, who is expected to make a detailed presentation to the group after announcing buyback plans earlier in the day in Athens. | Much of the attention at the Monday meeting will focus on Mr. Stournaras, the Greek finance minister, who is expected to make a detailed presentation to the group after announcing buyback plans earlier in the day in Athens. |
| Officials have not said how much debt must be retired for the buyback to be considered successful. But Greece could “help bolster the takeup of the scheme” by offering investors prices that depend on the bond being sold, BNP Paribas, the large French bank, wrote in a briefing note Friday. The buyback could reduce Greek debt about €20 billion, or $26 billion, the bank added. | Officials have not said how much debt must be retired for the buyback to be considered successful. But Greece could “help bolster the takeup of the scheme” by offering investors prices that depend on the bond being sold, BNP Paribas, the large French bank, wrote in a briefing note Friday. The buyback could reduce Greek debt about €20 billion, or $26 billion, the bank added. |
| Because the Monday session is the finance ministers’ regular monthly meeting, Greece is not the only topic on the agenda. The group will also discuss plans to recapitalize Cypriot banks, possibly within weeks, making Cyprus the fourth euro zone country to be bailed out, after Greece, Ireland and Portugal. | Because the Monday session is the finance ministers’ regular monthly meeting, Greece is not the only topic on the agenda. The group will also discuss plans to recapitalize Cypriot banks, possibly within weeks, making Cyprus the fourth euro zone country to be bailed out, after Greece, Ireland and Portugal. |
| Ministers are still waiting for an assessment from a consultant, the investment company Pimco, to determine Cyprus’s overall financing needs. | Ministers are still waiting for an assessment from a consultant, the investment company Pimco, to determine Cyprus’s overall financing needs. |
| If the bailout target turns out to be about €17.5 billion, as is widely expected, it would be about equivalent to the entire G.D.P. of Cyprus, raising serious concerns about how the country would ever be able to pay the money back. The uncertainty could leave ministers wrangling with the I.M.F. over the bailout package for several more weeks. | If the bailout target turns out to be about €17.5 billion, as is widely expected, it would be about equivalent to the entire G.D.P. of Cyprus, raising serious concerns about how the country would ever be able to pay the money back. The uncertainty could leave ministers wrangling with the I.M.F. over the bailout package for several more weeks. |
| On Tuesday, finance ministers from the European Union’s 10 noneuro states will join the meeting. The goal at that point will be to overcome sharp disagreements among members about the mission of the single banking regulator for the European Union that is supposed to be set up under the aegis of the central bank. | On Tuesday, finance ministers from the European Union’s 10 noneuro states will join the meeting. The goal at that point will be to overcome sharp disagreements among members about the mission of the single banking regulator for the European Union that is supposed to be set up under the aegis of the central bank. |
| Establishing the new regulator is intended to be the first step in the creation of a European banking union to improve financial oversight and reduce the financial risks of banks across Europe, rather than continuing to let individual nations and their taxpayers shoulder the burden of propping up troubled institutions. | Establishing the new regulator is intended to be the first step in the creation of a European banking union to improve financial oversight and reduce the financial risks of banks across Europe, rather than continuing to let individual nations and their taxpayers shoulder the burden of propping up troubled institutions. |
| Most of the emergency aid under discussion for Greece and Cyprus would be used to bolster their banks’ capital. | Most of the emergency aid under discussion for Greece and Cyprus would be used to bolster their banks’ capital. |
| But governments are still at loggerheads about how many banks the more unified system would cover, when it should take effect and how to balance the interests of banks inside and outside the euro zone. | But governments are still at loggerheads about how many banks the more unified system would cover, when it should take effect and how to balance the interests of banks inside and outside the euro zone. |
| The central bank said last week that the European Union should start phasing in the new system by Jan. 1, so the bank can gradually assume its new responsibilities over the course of the year and make the system fully operational by the beginning of 2014. | The central bank said last week that the European Union should start phasing in the new system by Jan. 1, so the bank can gradually assume its new responsibilities over the course of the year and make the system fully operational by the beginning of 2014. |
| But Anders Borg, finance minister of Sweden, which does not use the euro and whose officials are concerned about interference from a new central regulator, said Friday that the gulf between member states remained “very wide” and that more meetings would be needed beyond Tuesday. | But Anders Borg, finance minister of Sweden, which does not use the euro and whose officials are concerned about interference from a new central regulator, said Friday that the gulf between member states remained “very wide” and that more meetings would be needed beyond Tuesday. |