Cuts to Greek nominal debt ruled out

Euro zone finance ministers pledge to work constructively with new government in Greece following Syriza victory, but won’t support debt write-off

Minister for Finance Michael Noonan with the European economics commissioner Pierre Moscovici in Brussels. Photograph: Emmanuel Dunand/AFP

Minister for Finance Michael Noonan with the European economics commissioner Pierre Moscovici in Brussels. Photograph: Emmanuel Dunand/AFP

 

Euro zone finance minsters pledged to “work constructively” with the new Greek government but ruled out any cut to the country’s nominal debt despite hinting at possible concessions on the payment profile of Greece’s bailout loans.

Speaking after yesterday’s scheduled meeting of euro zone finance ministers, the group’s chief Jeroen Dijsselbloem said it was “too early” to speculate on the status of the Greek bailout, following the elections, though it “stood ready” to support the new government.

Earlier the Dutch finance minister appeared to rule out any major concessions on Greece’s debt burden, a key policy priority of Syriza. “Writing off debt in nominal value, I don’t think there is a lot of support for that.”

However, EU sources suggested some form of debt restructuring, most likely an extension of Greece’s loan maturities, was possible.

Asked if the troika planned to return to Athens for its final bailout review, Mr Dijsselbloem said it was “impossible to answer”.

“We will have to await the stance of the new government . . . It depends on the position the Greek government will take, and when we will start serious talks.”

Appointment

The Eurogroup chief did not mention the new minister by name but the appointment of Yanis Varoufakis is expected to be announced tomorrow.

Greece’s outgoing finance minister Gikas Hardouvelis represented the Greek government at yesterday’s meeting, which was attended by all 19 euro zone finance ministers.

Arriving in Brussels, Minister for Finance Michael Noonan said a European debt conference, as proposed by Syriza, was “not necessary yet”.

Asked about his comments this month in which he indicated broad support for a debt conference, he said all bailout negotiations so far had been conducted within the context of the Eurogroup. “I don’t think it’s necessary yet. Cyprus and Greece and Portugal and Ireland and Spain have all been resolved by negotiations at Eurogroup and Ecofin, and there’s no suggestion that that model won’t succeed again.”

Mr Noonan said Ireland had contributed €350 million to the Greek bailout, hence there was “€350 million of Ireland’s taxpayers’ money at play”.

IMF loans

“The issue for Greece is not debt cancellation, it’s the affordability of the debt – that means the interest rate and the maturities,” he said, pointing out that restructuring was more difficult when yields were running at close to 9 per cent as in the case of Greece, rather than 1.7 per cent in the case of Ireland. “Our debt is in a very good position now; it’s affordable and it’s repayable.”

He said Ireland’s quest for retroactive direct recapitalisation from the ESM fund for AIB and Bank of Ireland was still on the table, even though the Government was looking into options for selling AIB.

“There are alternatives that might suit the taxpayer better, like selling the shares on the market. Direct recap always involved selling bank shares to the European ESM, but a better alternative may be to sell on the market, and that’s why we have retained financial advisers to advise us on which way to go, but both options are still there.”