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Euro zone central banks may roll over their Greek bonds

A Greek flag flutters at the Acropolis hill in Athens November 27, 2012. REUTERS/John Kolesidis
A Greek flag flutters at the Acropolis hill in Athens November 27, 2012. REUTERS/John Kolesidis

By Jan Strupczewski

BRUSSELS (Reuters) - Euro zone central banks may decide to roll over their holdings of Greek state debt to reduce by 5.6 billion euros the amount governments will need to provide Athens by 2016, according to a document seen 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 said 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, stating in a footnote that the amounts are tentative and subject to national central banks approval.

The European Central Bank declined to comment on the issue.

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

When the second bailout for Greece was agreed in February, national central banks had agreed at the time to transfer the profits they would have made on their Greek bond investment portfolios to Greece, but not to roll over the holdings.

The transfer of just the ANFA profits would have produced only 1.7 billion euros until 2014, according to the Second Economic Adjustment Programme for Greece from March, published by the European Commission.

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 assumes that all the profits from the SMP portfolio of bonds would be returned, but this is not completely decided yet. Bundesbank President Jens Weidmann said earlier on Thursday it would be up to the German parliament to decide what to do with the German share of the SMP profits.

This return of all the 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 lending to Greece until 2016 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, the document showed.

But this would be offset by new debt relief measures penciled 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.

(Additional reporting by Eva Kuehnen in Frankfurt; Reporting by Jan Strupczewski; editing by Rex Merrifield/Jeremy Gaunt)

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