EU's Rehn 'confident' on Greece deal

14th June 2011, Comments 0 comments

Economic Affairs Commissioner Olli Rehn said Tuesday he was confident the European Union would overcome its differences on a new Greek rescue package, and along the lines of contentious German proposals.

"We are trying to reach a solution and I am confident that we will manage to by the end of June," when a summit of EU leaders takes place, Rehn told the Sueddeutsche Zeitung German daily.

"Being the largest economy, Germany of course has decisive influence on European decisions. Some Europeans agree with the German position, others do not. But we are not as far from reaching a solution as some people think."

He added: "We are preparing an agreement on the basis of the Vienna Initiative whereby the banks hold onto their bonds for longer, and on a voluntary basis.

"We are ready to look at a solution based on the voluntary extension of bond maturities and which under no circumstances leads to a loan default," he said in comments published in German.

Such a solution involving private banks agreeing to extend maturities, a plan backed by Germany, is however highly contentious. The European Central Bank, among others, argues that it would constitute a highly damaging default.

Standard and Poor's slashed its credit rating for Greece Monday by three notches, saying that it saw it as "increasingly likely" that the deal being hammered out would under its criteria constitute a default.

The ECB, backed by France and others, would prefer to see a so-called debt rollover, whereby banks voluntarily buy new bonds with longer maturities to replace those coming to term in the coming few years.

EU and International Monetary Fund experts warned that 12 billion euros ($17 billion) of emergency loans needed in July can only realistically be paid out if a new financing deal is sealed at the June 23-24 EU summit.

EU finance ministers were due to discuss the situation at a meeting in Brussels later on Tuesday.

© 2011 AFP

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