Euro zone central banks may roll over their Greek bonds

BRUSSELS: Euro zone central banks may decide to roll over their holdings of Greek debt to reduce by 5.6 billion euros the amount governments will need to provide Athens by 2016, according to an document obtained by Reuters.

Such a move would cut the amount to 2 billion euros from 7.6 billion, the document, which emerged from this week's euro zone finance minister's meeting, showed.

International lenders -- euro zone countries, the European Central Bank and the International Monetary Fund -- agreed early on Tuesday on a debt reduction plan for Athens that would bring Greek debt to 110 percent of GDP in 2022.

This would be down from almost 190 percent expected for next year.

According to the document, Greece would need to get 1.8 billion euros in extra financing in 2012-2014 and another 5.8 billion between 2015 and 2016 -- a total of 7.6 billion.

But it floated the idea that if the euro zone's 17 national central banks, which together form the Eurosystem, decide to replace the Greek bonds they hold with new Greek paper as the debt matures, it would save Greece the need to redeem 3.7 billion euros in 2012-2014 and 1.9 billion euros in 2015-2016.

It lists the item of "roll-over of ANFA holdings" -- a term to describe central banks' investment portfolios -- in parenthesis, suggesting it has yet to be agreed or in any way formalised.

Furthermore, it notes that the amounts mentioned are tentative and subject to approval by national central banks.

There is no public data on the amounts of Greek debt held by individual euro zone central banks.

HELPING ATHENS

The roll-over idea is separate from the issue of the European Central Bank returning profits to Athens from the Greek bond portfolio it has acquired under its Securities Market Programme (SMP).

That will reduce the financing needs of Greece by 4.1 billion euros in 2012-2014 and another 3.0 billion in 2015-2016.

This return of profits -- along with cutting interest on euro zone loans to Greece, a deferral of interest payments, maturities extension, and several other measures -- allowed the euro zone to cut the amount of new money it would have to lend to Greece to 7.6 billion euros from 32 billion euros.

A roll-over of the Greek bonds in investment portfolios of central banks would increase the overall Greek public debt by 0.1 percent of GDP in 2020 and 2022.

But this would be offset by new debt relief measures pencilled in by international lenders for the coming years that would cut Greek debt by 2.7 percent of GDP by 2020 and 5.1 percent of GDP by 2022, the document said.

This new debt relief could happen once Greece reaches a primary surplus -- a positive budget balance before servicing debt -- and if Greek reforms are on track, euro zone finance ministers decided on Tuesday.