debt restructuring

Peter Spiegel

Regling, right, with European Central Bank president Mario Draghi at a press conference

Klaus Regling has been the head of the eurozone’s rescue funds – first the temporary European Financial Stability Facility, now the permanent European Stability Mechanism – since the outset of the debt crisis, a perch that has given him a unique insight into the five years of occasionally contentious deliberations over the bloc’s five bailouts: Greece, Ireland, Portugal, Spain and Cyprus.

But as the EFSF turned into the ESM, and as the €500bn ESM gained staff and authority, Regling’s own role in eurozone debates has grown – particularly on the issue of Greek debt, where he has been a frequent and outspoken critic of the argument, made both in Athens and by the International Monetary Fund, that the heavy debt burden is what ails the Greek economy.

Two years ago, in an interview with our friends and rivals at the Wall Street Journal, Regling in essence sounded the death knell for a November 2012 deal where eurozone governments had promised debt relief for Athens as long as it achieved a primary budget surplus – something it achieved by the end of 2013. As Regling predicted, the eurozone did not restructure Greece’s debts despite Athens living up to its side of the 2012 agreement and posting a surplus.

In an interview this week with the Financial Times, Regling has done something similar. As part of July’s controversial €86bn bailout deal, creditors again held out the promise of debt relief. And Regling is now suggesting that even if it does occur, a restructuring will not be on the scale Athens and the IMF had been arguing for just four months ago.

Our story on the Regling interview is here, but as is our practice at the Brussels Blog, we’re offering an annotated (and slightly edited for length) transcript for readers who want to hear more from Regling below. Read more

Peter Spiegel

Tsipras, left, with European Commission president Jean-Claude Juncker on Wednesday

The Greek government of prime minister Alexis Tsipras has long argued debt relief must be part of any new agreement to complete its current €172bn bailout. But the compromise plan drawn up by its international creditors and presented to Tsipras on Wednesday night in Brussels (obtained by the Greek daily To Vima, and posted here) contains no such promise.

So Athens is intending to present its own restructuring plan that the government claims will cut its burgeoning debt load from the current 180 per cent of gross domestic product to just 93 per cent by 2020.

The plan is touched on in the 47-page counter-proposal Athens sent to its creditors Monday night (see page 44 in the document, posted by the German daily Tagesspiegel here). But it is given a full treatment in a new seven-page document authored by the government and entitled “Ending the Greek Crisis”. Brussels Blog got a copy and posted it here.

The restructuring plan is ambitious, offering ways to reduce the amount of debt held by all four of its public-sector creditors: the European Central Bank, which holds €27bn in Greek bonds purchased starting in 2010; the International Monetary Fund, which is owed about €20bn from bailout loans; individual eurozone member states, which banded together to make €53bn bilateral loans to Athens as part of its first bailout; and the eurozone’s bailout fund, the European Financial Stability Facility, which picks up the EU’s €144bn in the current programme.

If all the elements of the new plan are adopted, the Greek government reckons its debt will be back under 60 per cent of GDP – the eurozone’s ceiling agreed under the 1992 Maastricht Treaty – by 2030, as this chart from the document shows:

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Nicolas Sarkozy and Angela Merkel prior to their meeting at the Elysee Palace on Monday. Photo: Remy de la Mauvinere/AP 

Nicolas Sarkozy and Angela Merkel before their meeting at the Elysee palace on Monday. Photo: Remy de la Mauvinere/AP

Welcome back to our live coverage of the eurozone crisis. By Esther Bintliff on the world news desk in London, with contributions from FT correspondents around the world.

This post should update automatically every few minutes, but it may take longer on mobile devices. All times are GMT.

16.15: One of the areas where Angela Merkel appears to have backed down is around the role of the European Court of Justice, reports Joshua Chaffin, our correspondent in Brussels:

Ms Merkel had wanted the ECJ – the European Union’s highest court – to become the ultimate enforcer of new budget rules for the eurozone countries.

 Read more