Finance ministers keep options open on Greece

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The Independent Online

European finance ministers left their options open on Greece after an informal gathering in Brussels yesterday, though a second, €100bn (£88bn) aid deal seems certain to be agreed at a formal meeting next week.

Greece, meanwhile, managed to get a €1.6bn government bond auction away, even as there were increasing signs of cabinet resistance to the EU and IMF's demands for radical privatisations.

The finance minister of Luxembourg, Jean-Claude Juncker, who also leads the eurozone group of ministers, said no decision was taken. "We will collect all available information, discuss all available options," he said.

It is still not clear whether Greece will be made to require private-sector bondholders to "share the pain" in some way through a restructuring of Greek government debt, probably via a longer maturity period, and possibly by voluntary agreement. Mr Juncker has hinted at this and a leaked letter from the German finance minister, Wolfgang Schäuble, also pointed this way.

Importantly, the incoming European Central Bank (ECB) president Mario Draghi suggested a repeat of the voluntary 2009 "Vienna Initiative" as a way out of the crisis.

"There are basically two initiatives that are under discussion," Mr Draghi told a European Parliament hearing to ratify his proposed appointment as ECB head later this year. "One is the Vienna Initiative, which to me looks entirely voluntary. The ECB is not in favour of restructuring or haircuts. We should exclude all concepts that are not purely voluntary or that have any element of compulsion".

Under the Vienna Initiative for Hungary and other central and eastern European nations, international lenders agreed in 2009 to boost credit to the region; the main commercial banks in return committed to roll over credit lines. Some kind of Greek default is regarded as certain by markets. Whether a "Vienna" arrangement counts as a "credit event" or default will essentially be a legal matter.