Greece seeks negotiations on ECB bond repayment

Sat Feb 28, 2015 5:23am EST
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ATHENS (Reuters) - Greece called into question on Saturday a major debt repayment it must make to the European Central Bank this summer, after acknowledging it faces problems in meeting its obligations to international creditors.

Finance Minister Yanis Varoufakis said Athens should negotiate with the ECB on 6.7 billion euros ($7.5 billion) in Greek government bonds held by the Frankfurt-based bank that mature in July and August.

Varoufakis did not say what he hoped to achieve in any talks, but he accused the ECB of making a mistake in buying the bonds around the time Greece had to take an EU/IMF bailout in 2010.

"Shouldn't we negotiate this? We will fight it," he said in an interview with Skai television. "If we had the money we would pay ... They know we don't have it."

The government of leftist Prime Minister Alexis Tsipras promised to honor all its debt obligations when it struck a deal with the euro zone last week that extended Greece's bailout program for four months.

But Athens will get no more money until the European Commission, ECB and International Monetary Fund have approved in detail its economic plans during the four-month period.

With tax revenue falling far short of target last month and an economic recovery faltering, the state must repay an IMF loan of around 1.6 billion euros in March and find 800 million in interest payments in April. It then needs about 7.5 billion in July and August to repay the bonds held by the ECB and make other interest payments.

The ECB bought the bonds on the secondary market under its Securities Markets Programme (SMP) which aimed to reduce borrowing costs for troubled southern European governments during the euro zone debt crisis.

However, Greece was frozen out of international debt markets, and more than four years later is still unable to fund itself commercially apart from limited issues of short-term treasury bills.   Continued...

A Greek national flag waves under rainfall during a rally of the Greek Communist party in Athens February 27, 2015.  REUTERS/Alkis Konstantinidis