Greece to Borrow up to €35 Billion for Debt Buyback

Wall Street Journal
February 11, 2012

Greece will borrow up to €35 billion from Europe's temporary bailout fund to finance an ambitious debt-buyback plan from the European Central Bank, according to official documents released by the government Saturday.

The 19-page bill sets out how the restructuring will be implemented and includes a plan through which Greece will buy back those bonds now held as collateral in the national central banks of euro-zone countries.

The plan is part of a raft of new measures Greece must take to secure a €130 billion bailout from its European partners and the International Monetary Fund, along with a €100 billion debt write-down the country is negotiating with its private-sector creditors.

The measures, which will be voted on in parliament Sunday, include sweeping reforms such as €1.1 billion worth of cuts in pharmaceutical costs, abolishing restrictive rules on tourist guides and opening up Greece's energy market to foreign investment.

According to the bill, the European Financial Stability Facility, the euro zone's transitional rescue fund, will lend Greece the money to carry out the buyback. The ECB will act as an intermediary in this transaction, buying the bonds on Greece's behalf.

Specifically, the draft legislation says that under the "ECB Credit Enhancement Facility Agreement [there will be] provision of financial assistance, up to the total amount of €35 billion, in order to offer the Hellenic Republic the ability to finance the possible buyback of its bonds that have been offered as collateral in the euro system, with EFSF bonds."

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