Euro Zone Spars Over Solution for Greece

Wall Street Journal
January 24, 2012

Germany and the International Monetary Fund pressed their case at a meeting of euro-zone finance ministers Monday that Greece's private-sector creditors should agree to receive average interest rates of less than 4% in the planned restructuring of Greek debt, deepening a standoff that has delayed the time-sensitive talks.

Creditors have pushed for a coupon above 4%.

The euro zone's four triple-A-rated countries—Germany, the Netherlands, Finland and Luxembourg—are pushing for average interest rates on the new bonds of no more than 3.5%. After the meeting, Luxembourg Prime Minister Jean-Claude Juncker, who also is chairman of meetings of euro-zone finance ministers, said the average coupon should be "clearly below 4%."

The IMF voiced concerns Monday that the deal being discussed by Greece and the creditors would leave the country with a higher-than-expected debt burden in the years ahead, people familiar with the matter said.

That sets up a difficult choice: Press bondholders to accept more losses, or accept that Greece's peers and the IMF will have to kick in more support.

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