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Eurogroup to discuss bridge financing for Greece
[BRUSSELS] Eurozone finance ministers will discuss on Monday how to keep Greece financed during the time it will need to agree a third bailout, but none of the options under consideration appear easy, officials said.
"The big issue for today is going to be bridge financing and I foresee those negotiations being very difficult because I don't see many countries having a mandate to give money without any conditions," said Finnish Finance Minister Alexander Stubb.
Greece hopes to start talks on a bailout of up to 86 billion euros at the end of the week after its parliament passes a raft of laws by Wednesday to show it is ready to reform.
But the bailout talks are likely to be tough and probably take many weeks, if not months.
Yet already by next Monday Greece will need 3.5 billion euros to redeem maturing bonds held by the European Central Bank. It also has to settle its overdue obligations to the International Monetary Fund from Monday and the end of June.
Overall, in July, Athens needs 7 billion euros according to estimates by the institutions representing its creditors. It will need a further 5 billion euros to cover maturing debt payments by mid-August.
One option is to release to Greece what are known as SMP profits that the ECB and national central banks of the eurozone made on purchases of Greek bonds during the sovereign debt crisis. This amounts to 1.9 billion for 2014 and 1.4 billion for 2015, so alone it is not enough to cover the financing needs.
A second option is to use money still left in the European Financial Stability Mechanism (EFSM) - a bailout fund created in 2010, that was used to help Ireland and Portugal.
There is 13.2 billion euros left in the EFSM, but because bonds issued by the European Commission to raise that amount would be backed by the European Union budget, the money can be used only with the consent of all 28 EU countries, not just the 19 from the eurozone.
Britain already refused in 2011 to use the EFSM to bail out Greece for the second time and is likely to do so again.
London could be outvoted on the issue, because the use of the EFSM can be decided by a qualified majority of EU states. That is 15 countries representing 65 per cent of the EU's population. But EU institutions will be wary of angering British voters ahead of a referendum on Britain's EU membership by 2017.
Another option under consideration is bilateral loans to Greece from other eurozone countries, similar to the first Greek bailout organised in 2010 when none of the common bailout funds yet existed.
Such bilateral loans could later be somehow offset or deducted from the full bailout financed by the European Stability Mechanism - the eurozone's joint bailout fund.
France, which had supported Greece the most in the latest round of talks, appeared the most natural candidate to extend such bilateral loans to Athens, but French officials were quick to deny that such an idea was being considered.
No other country seemed immediately willing or able to make such bridging loans.
Finally, the ECB could raise the ceiling on the amount of Greek T-bills it accepts as collateral in its refinancing operations with Greek banks.
That would allow the banks to buy more short-term debt from the Greek government and in this way provide Athens with quick cash.