Euro zone may need to help Greece more-Juncker in paper



Jan 27 (Reuters) – Euro zone members may have to increase their financial support for Greece if Athens and the private sector do their part to address the country’s debt crisis, Eurogroup head Jean-Claude Juncker told a newspaper.

“If Greece’s ability to sustain debt is proven and there is an overall understanding with the private sector, then the public sector will also have to ask itself if it will not provide help,” he told Austrian paper Der Standard in an interview published on Friday.

He said it was up to the European Central Bank to decide what role it would play in contributing to debt relief via its holdings of Greek state bonds.

“The central bank is independent and it is not appropriate for the president of the Eurogroup to give public advice to the defenders of the currency,” he was quoted as saying.

Juncker said the private sector had to come up with a better offer for the interest rate it would accept in return for swapping Greek bonds into new ones.

“Our expectation is for Greece to have reduced its public debt to 120 percent of economic output by 2020. Probably this will not be achieved in full, but we still need steps in this direction. As a consequence that means the banks’ offer on interest rates for new Greek bonds must be improved.”

He said it was still undecided whether funds left from the EFSF bailout fund would flow into the permanent ESM fund for struggling euro zone members but he supported the idea.

Greece and its private creditors made progress on Thursday in talks on restructuring its debt, both sides said, and they will continue negotiating on Friday with the aim of sealing an agreement within a few days.

Athens needs a deal quickly to avert a chaotic default when a major bond redemption comes due in March. Greece’s creditors are demanding that the European Central Bank contribute to a deal to put the country’s messy finances back on track.

The ECB, which owns roughly 40 billion euros worth of Greek bonds, is no closer to agreeing on whether or not it will take losses on the Greek bonds it owns after a late night Wednesday meeting, euro zone central bank sources told Reuters.

Either way, a debt deal at the very latest must be clinched a month before 14.5 billion euros of bond redemptions fall due on March 20, the first source said, i.e., in just over three weeks.

If a deal is not reached by then, Greece could sink into an uncontrolled default that would trigger a banking crisis spreading contagion through the euro zone, though the ECB’s creation of nearly half a trillion euros of three-year money for the banks in December has tempered that fear.