02.02.2012
By Simon Miller
Greece is reportedly nearing a deal with private debt holders over the extent of the haircut they will have to take.
The deal will see bondholders take a 70% hit on their holdings and is expected to take €100bn (£83bn) of Greece’s debt.
However, with bailout out costs jumping to €145bn and a row with European Union officials and the International Monetary Fund (IMF) over further austerity cuts of around 1% of GDP, there are still fears that Greece could still default come March.
Greek political leaders are to meet to formulate a response to “Troika” demands and IMF officials have admitted that there may be a limit to what the country can take.
Speaking to Greek newspaper Kathimerini, chief IMF negotiator Poul Thomsen commented: “"We will have to slow down a little as far as fiscal adjustment is concerned and move faster - much faster - with implementing reforms. Greece must continue reducing its budget deficit, but society and political support have their limits and we'd like to make sure that we strike the right balance.”
Meanwhile, Germany’s Central Bank has exhausted its stock of private assets and run up a quarter of a trillion euros in liabilities propping up the eurozone according to the Daily Telegraph.
The paper said that the Bundesbank had sold all of its €270bn of private securities last year as a result of growing demands in the TARGET2 scheme which is a series of automatic payments between the national central banks in the eurozone.
The Bundesbank has already provided €496bn to the troubled countries such as Greece, Ireland, Italy and Spain and holds an estimated €12bn of Greek debt.
"This is reaching the danger point. It is already one and a half times the total budget of the German government," Professor Frank Westermann of Osnabrück University told the Telegraph. "If any of the crisis countries exits the euro or if there is an EMU break-up, the Bundesbank bears extreme risks."
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