FRANKFURT (MNI) – The finance ministers of Europe will hold an
emergency conclave Tuesday to try and resolve disagreements over a new
rescue package for Greece whose cost is estimated at around E85 billion
through 2014, the Financial Times reported late Monday.

Without naming sources, the paper reported that senior officials
had told it that the bailout is threatened by the divergent views of the
German government and the European Central Bank with respect to the role
of private investors.

The Eurogroup of Eurozone finance ministers would meet in the
afternoon, the paper said without specifying where this would take
place, followed by an evening gathering of the Ecofin, which includes
all 27 national finance ministers of the European Union.

“We need to clarify some basic choices,” the paper quoted a source
as saying. “We may well have to work on the basis of several options,
but we’ll narrow down the options in any case so that we have a more
meaningful way to move forward.”

The crux of the disagreement is the ECB’s opposition to Germany’s
desire to induce current holders of Greek debt to accept a swap of old
bonds for new bonds with a later maturity date. ECB officials believe
this would be tantamount to a default.

Wary of possible market turbulence under such a scenario, the ECB,
backed by France, would prefer a debt rollover under which bondholders
would voluntarily buy new bonds with a later maturity date as existing
holdings come due over the next three years.

The solution to the impasse will determine the source of the E85
billion of additional funds still expected to be needed by Greece
through 2014 on top of E30 billion it hopes to net from privatization of
state assets and E57 billion in disbursements from the current bailout
package.

The FT reported that Germany think E30 billion could come from its
proposed debt swap scheme, leaving E55 billion to be financed by loans
from Greece’s EU partners and the IMF.

The paper further quoted the unnamed official as remarking that “it
is not in anybody’s interest to let this confrontation between Germany
and the ECB continue until the European Council” on June 23, which is
the final deadline for a decision.

“I think it’s more likely to be rollover,” said the source,
according to the FT. “There’s even quite a clear majority between the
member states towards that option. The ECB has hardened its position, so
now the question is can the Germans somehow show some flexibility.”

–Frankfurt bureau tel.: +49-69-720142. Email: dbarwick@marketnews.com

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