Eurozone Finance Ministers Debate Greek Buyback

ATHENS, Greece (AP) -- Finance ministers from the 17 European Union countries that use the euro conferred late Tuesday on the results of a key bond buyback designed to ease Greece's crippling debt load and unlock vital rescue loans.

The conference call came hours after the deadline expired for banks, hedge funds, and other private investors to decide whether they will sell back their Greek government bonds at a steep discount on their face value.

Athens had no official comment on how many investors had signed up for the buyback.

The deal offered attractive terms to foreign investors that had bought the Greek bonds at rock-bottom prices during the worst period of the financial crisis and now stand to make a hefty profit. Greece's cash-starved banks, which also own some of the bonds, had little option other than to sign up as they depend on government rescue loans.

Greece's main stock index rallied Tuesday, closing 2.3 percent higher, on expectations that the deal would succeed.

The country's international bailout creditors -- fellow eurozone countries and the International Monetary Fund -- had demanded the buyback as one of the conditions for paying out a long-delayed installment in rescue loans.

If the buyback goes well, eurozone officials will approve Thursday the disbursement of €34 billion. The money is earmarked to boost domestic lenders and pay some of the government's mounting bills to state suppliers.

Debt-crippled Greece has depended on international rescue loans for the past two and a half years, after it admitted its budget deficit was more than three times the initial forecast and swiftly lost access global bond markets. In exchange for the funds, the government repeatedly slashed incomes and raised taxes to tame the deficit -- but in the process also created widespread public resentment.

The initial deadline for submission of interest has been extended from last week, to encourage the biggest possible participation. The buyback hopes to shave some €20 billion off Greece's €340 billion national debt load.

Athens can use up to €10 billion in European funds to rebuy about half its privately held debt at a third of its nominal value. The proposal should be attractive to many investors, as the average price was higher than the market value of its bonds when the offer was announced, and some daring bondholders who bought during the summer could see their initial outlay triple.

Although the country is frozen out of long-term bond markets, it maintains a market presence with regular sales of short-term debt. The T-bills are mostly taken up by the liquidity-starved domestic banks that need them as collateral for their own borrowing needs.

Earlier Tuesday, Athens raised €4.4 billion ($5.7 billion) in auctions of one-month Treasury bills -- an unusually short-term issue which Greece has resorted to twice in as many months -- and six-month paper.

In both cases, the yields were not significantly changed from the previous auctions of the same maturity.


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