Pressure on EU to finalise second Greek bailout

EXPERTS are working overtime to come up with a second Greek bailout worth about €120 billion for Thursday’s emergency eurozone summit.

EU leaders are under increasing pressure to agree a comprehensive solution, as contagion from Greece threatens Spain and Italy.

Germany continues to insist private investors holding Greek debt must take a hit, while the Institute of International Finance (IIF) representing the bankers want the EU to agree to buy back debt on the secondary markets in exchange.

German Chancellor Angela Merkel has warned she will not attend Thursday’s summit unless a deal that everyone can sign up to is on the table. Germany says there must be private sector involvement, although credit ratings agencies say they will call it a default.

ECB president Jean-Claude Trichet reiterated yesterday that the bank will not be able to provide Greek banks with money if there is a default.

Talks in Rome over the weekend with the private investors, represented by the US-based IFF, and EU officials did not come up with a solution but they are understood to be working on a series of possibilities.

Work is also under way in Brussels with experts working out the implications and costs of the various options on the table. A meeting of the Eurozone Working Group — expert officials from the member states — is planned for Wednesday with a conference call with eurozone capitals in a bid to agree a final deal.

The eventual package could be composed of a mix of voluntary debt swaps with maturity extended up to 30 years, perhaps guaranteed by the EU’s funding mechanism, the European Financial Stability Fund (EFSF) and buy-backs of loans by Greece with money from the EFSF.

Tánaiste Eamon Gilmore in Brussels yesterday said, if European leaders can agree a comprehensive solution, it would greatly minimise any contagion effect. He was hopeful any agreement for Greece would be extended to Ireland.

Mr Gilmore ruled out Ireland burning its bondholders and repeated that they would not attempt to haircut money owed to Anglo Irish Bank investors if the ECB did not approve it.

The Tánaiste, addressing an event organised by the European Policy Centre yesterday, said Ireland’s return to the markets in 2013 would not be a dramatic overnight event.