EU official: Greece needs extra $20 billion

February 2, 2012 RSS Feed Print

Germany's finance minister, Wolfgang Schaeuble, said on n-tv television Thursday that he didn't see the need for "any extra contributions from the public sector; we're carrying everything anyway."

Schaeuble didn't address the issue of the euro15 billion funding gap.

The majority of the ECB's Greek bonds were bought at a discount in the summer of 2010, when the central bank was trying to stabilize their prices. Even though it is bound by the rules of the EU treaty, it could find a way to give up the substantial profit it would earn by holding the bonds to maturity. It could do that by selling the bonds to the eurozone bailout fund or to Greece at the knockdown prices it bought them for.

However, the ECB has so far given no indication that it is willing to do so, with some of its governing board members saying that giving up on profits would clash with the bank's ban.

Alternatively, eurozone states could boost their bailout loans beyond the promised euro130 billion, or provide some, more-limited, relief by further lowering interest rates on these loans.

Analyst Carsten Brzeski at ING in Brussels said the ECB and President Mario Draghi might be open to giving up the profits on the bonds. But the bank will wait to take action so it does not appear to be acting at the request of politicians.

The bank is legally independent and the EU treaty forbids it to take instructions from government officials.

"I think Draghi could live with it, but they will not bow very easily," said Brzeski. "It has to look like it is their own idea, their own initiative."

While officials have stressed the need for Greece's financing to be set before the bailout goes through, the main players have been flexible before and "it's not as hardball as it looks."

On the official side, "someone will have to bite the bullet, or everyone," he said. European officials are trying "to have everyone take part in the burden sharing and thereby get the ECB involved."

The euro130 billion second bailout package also still depends on labor market reforms that the EU and IMF are asking Greece to implement. Unions and employers resumed talks on Thursday over troika demands to lower wage costs in the private sector and possibly lower the minimum wage.

AP Business Writer David McHugh contributed from Frankfurt.