Plans for a second bailout to Greece are taking shape, with a proposal for a three-year package worth 80 to 100 billion euros set to be ready in the next two weeks, euro zone official sources said on Tuesday.
But key aspects of the scheme, including how to persuade private sector investors to bear part of the burden, have not been resolved and time is tight before late-June meetings at which officials hope to present the plans to decision-makers.
If approved by euro zone governments, the package will consist of revenue from three sources: sales of Greek state assets, a rollover of Greek debt by private sector creditors, and fresh funds from the euro zone bailout facility and the International Monetary Fund, the sources told Reuters.
Euro zone leaders hope the second package, which would effectively replace a 110 billion euro bailout deal agreed with Athens in May last year, will give Greece time to overhaul its economy and return to growth, allowing it to start reducing its 340 billion euro sovereign debt mountain. The balance between the three sources of funds will depend on the outcome of discussions with private holders of bonds, and on how much can be raised from the sale of Greek assets. But the sources said current thinking was that about 25-30 billion euros would come from asset sales; 30 billion from the debt rollover; and the rest, 30-40 billion euros, from the IMF and the bailout fund, the European Financial Stability Facility. As with rescues of Ireland and Portugal, the EFSF would provide two-thirds of official loans and the IMF one-third.
The new package would fund Greece for up to three years, or until it can return to financial markets to fund itself, which is now expected to be in mid-to-late 2014 or early 2015, the sources said. The initial bailout scheme envisaged Greece gradually returning to the markets from next year.
“The estimate of the size is up to 100 billion euros, with the key element being the degree of voluntary private sector involvement, which could contribute about one third or more,” one senior euro zone source involved in discussions of the new package told Reuters.
By the time the new bailout plan goes into effect later this year, Greece is likely to have received 65 billion euros of the emergency official loans earmarked for it in the first package, leaving 45 billion euros yet to be disbursed.
It is not clear how much if any of those remaining loans would be folded into the new package. European Economic and Monetary Affairs Commissioner Olli Rehn, speaking to the finance committee of the European Parliament on Monday, said the package would be ready “in the next few weeks, before the 20th of June”, when euro zone finance ministers will meet in Luxembourg. That deadline would permit European Union leaders to sign off on the new bailout.