European Central Bank Moves to Avoid Loss on Greek Bonds

New York Times
January 24, 2012

European leaders have begun discussions with the European Central Bank on several options that might keep it from having to take a loss on its 55 billion-euro portfolio of Greek bonds.

For months, the proposed debt restructuring deal between Greece and its private sector creditors had excluded the central bank from taking a loss on its Greek bond holdings while banks and hedge funds would have losses of 50 percent or more.

Among the measures being discussed Tuesday, according to officials involved in the negotiations, is one in which the central bank would exchange Greek bonds that it currently owns for a different form of Greek government debt that would not be eligible for a loss.

The talks remain fluid and could break down at any moment, said the officials, who were not authorized to speak publicly.

Also on Tuesday, European Union officials pressed political leaders to turn their attention to promoting growth, amid signs that a recovery will take longer than anticipated.

José Manuel Barroso, the president of the European Commission, urged government leaders to investigate “concrete measures to stimulate growth and employment.”

The leaders are set to meet next week in Brussels.

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