Reuters
February 3, 2012
Euro zone governments may have to provide up to 145 billion euros to Athens under a second emergency loan program for Greece, EU sources said on Friday, 15 billion euros more than previously expected.
The extra funds are mainly required to help recapitalize the Greek banking sector once a deal is struck to write down the value of bonds owned by private-sector creditors, the sources said.
"It's mostly because of recapitalization needs of Greek banks due to PSI," one of the sources said, referring to what's called private sector involvement. The other source did not say explicitly that 145 billion euros would be needed, but said that figure was the right order of size.
Negotiations with private sector creditors to take a 70 percent net-present-value writedown on their holdings, cutting Greece's debts by around 100 billion euros, are close to being concluded.
But it remains unclear how much of a writedown the official sector - the European Central Banks and national euro zone central banks - may have to take on their holdings of Greek government bonds in order to make Greece's overall debt burden sustainable.
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