Greek finance minister urges ECB to help plug funding gap

Reuters

ATHENS (Reuters) - Greece plans next year to roll over debt it issued to support its banks, moving to narrow a funding gap its finance minister said he expected the European Central Bank to help plug.

Athens will be financed by bailout loans until the second half of 2014 when it hopes to tap bond markets again. It then faces a funding gap of nearly 11 billion euros for 2014-15, the International Monetary Fund and authorities in Athens estimate.

In the latest in a series of options Greek officials have floated as a way of addressing the shortfall, Yannis Stournaras said Athens planned to roll over about 4.5 billion euros ($6.1 billion) of debt due next March.

Those funds, which boosted Greek banks' liquidity at the height of the credit crunch, were raised in 2009. In exchange the banks issued preferred shares to the government.

"This (rollover will) mean covering a big part of the funding gap," Stournaras told financial daily Naftemporiki in an interview published on Monday.

Greece's international lenders have agreed they could give it further debt relief if it meets fiscal targets this year, likely in the form of lower financing costs or extended repayment of its loans.

But none of the options Athens has so far come up with for squaring the funding circle have gained much traction abroad.

"Greece will ask for debt relief based on the decision by the Eurogroup (in November) and there are many ways this can be done," Stournaras said. "There are scenarios on extending these loans to 50 years, we are also working on similar scenarios."

CENTRAL BANKS 'OBLIGED TO HELP'

Cut off from bond markets since 2010 after its debt crisis exploded, Greece has been kept afloat by 240 billion euros in rescue loans from the European Union and IMF.

Asked whether Greek bonds held by euro zone central banks should also be rolled over to help cover the post-bailout funding gap, Stournaras told the paper this was part of a November 2012 agreement.

"There are Greek bonds held by central banks, which had said they would roll them over but up to now have not done so. If they do not want to implement this because they consider it monetary financing, they must find equivalent measures," the minister was quoted as saying.

The ECB and other euro zone central banks hold a nominal 19 billion euros of Greek bonds, of which 10 billion matures in 2014.

Greece's creditors agreed to look into the bloc's 17 national central banks replacing some of the Greek bonds they hold with new Greek paper as the debt matures.

This measure, called the "rollover of ANFA holdings", was expected to spare Greece from having to redeem 3.7 billion euros of debt in 2013-2014 and 1.9 billion euros in 2015-2016.

The European Commission puts Greece's funding gap at 3.8 billion euros for 2014 alone, while the IMF estimates it will be 4.4 billion euros.

But the plan has hit a snag because some central bankers are worried that it might be seen as direct financing of the Greek government.

Direct financing is banned under the ECB's statutes and Europe's central banks are independent of government control.

But Stournaras has not given up hope, and said that the central banks need to come to the rescue, one way or another.

"This is an obligation on their part which they must stick to ... We have up to now stuck to our promises. They must abide by theirs."

The ECB has also said it would not roll over Greek bonds it acquired through the Securities Markets Programme (SMP).

Asked in September if the ECB could offer Greece debt relief, ECB President Mario Draghi, said the answer was no.

"We went through this when we had the discussions about Greece almost a year or a year and a half ago. It is pretty clear that we cannot undertake monetary financing," he said.

The ECB declined to comment on Stournaras' remarks on Monday.

(Reporting by George Georgiopoulos, additional reporting by Sakari Suoninen in Frankfurt; Editing by John Stonestreet)

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