German warning on Greek bond buyback

27th July 2011, Comments 0 comments

Germany's finance minister warned on Wednesday that the eurozone's rescue fund did not have a "blank cheque" to buy back Greek bonds, referring to one of the key measures agreed at last week's crisis summit.

"Such purchases can in future only happen under very strict conditions, if the European Central Bank decides there are extraordinary conditions on financial markets and dangers to financial stability," Wolfgang Schaeuble said.

"The (German) government refuses a 'blank cheque' for comprehensive purchases (of Greek bonds) on secondary markets," Schaeuble told lawmakers in Chancellor Angela Merkel's governing coalition in a letter seen by AFP.

Allowing the European Financial Stability Facility (EFSF) to buy sovereign bonds at lower prices was one of a raft of measures agreed at last Thursday's summit aimed at helping Greece and preventing so-called contagion to other states.

Others included 109 billion euros ($158 billion) in aid from the eurozone and the International Monetary Fund and a 50-billion-euro contribution from the private sector by way of a 21-percent "haircut" on Greek bonds they own.

Eurozone members already bailed out will have longer to pay back rescue loans and the interest they have to pay will be lowered.

© 2011 AFP

0 Comments To This Article