January 31, 2012
The European Central Bank may forgo future profits on its Greek bonds as efforts remain under way to fill a financial hole that has been obstructing a second bailout for Greece.
Talks among senior European officials in Brussels ended Tuesday without any commitment from the central bank but with hopes still alive that the bank would agree to the deal.
Because the European Central Bank bought Greek bonds, with an estimated face value of 50 billion euros, ($65 billion) at a discount to their market price, it could enter into a deal that would cause it to give up future gains without taking a loss, said a European official, requesting anonymity because of the sensitivity of the issue.
The precise financing gap needs to be filled even after private sector investors agree, as expected, to take losses in excess of 50 percent on their bonds. Their losses alone will not be enough to allow Greece to hit its target ratio of debt to gross domestic product of 120 percent by 2020.
The issue of how to fill the gap must be resolved before Greece can qualify for a second bailout, expected to total around 130 billion euros ($170 billion).
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