Euro Zone Spars Over Solution for Greece





BRUSSELS—Germany and the International Monetary Fund pressed their case at a meeting of euro-zone finance ministers Monday that Greece’s private-sector creditors should agree to receive average interest rates of less than 4% in the planned restructuring of Greek debt, deepening a standoff that has delayed the time-sensitive talks.

Creditors have pushed for a coupon above 4%.

The euro zone’s four triple-A-rated countries—Germany, the Netherlands, Finland and Luxembourg—are pushing for average interest rates on the new bonds of no more than 3.5%. After the meeting, Luxembourg Prime Minister Jean-Claude Juncker, who also is chairman of meetings of euro-zone finance ministers, said the average coupon should be “clearly below 4%.”


The IMF voiced concerns Monday that the deal being discussed by Greece and the creditors would leave the country with a higher-than-expected debt burden in the years ahead, people familiar with the matter said.

That sets up a difficult choice: Press bondholders to accept more losses, or accept that Greece’s peers and the IMF will have to kick in more support.

Greece’s rescuers are eager to complete the restructuring—it will relieve some of the burden from their shoulders—but they want Greece to emerge from it healthy enough to repay its still-considerable debts.


Euro-zone officials have set a target for Greece to have debt equal to no more than 120% of its gross domestic product by 2020, except for borrowing it may need in order to fund collateral for the restructuring. While that target would still leave Greece as the euro zone’s biggest debtor, the IMF and several stronger euro-zone countries, including Germany and the Netherlands, are sticking to it.

Two key elements will weigh on the progression of Greece’s debt load: how much relief it receives in the restructuring, and how well it executes growth-enhancing and budget-trimming reforms. In Monday’s meeting, German Finance Minister Wolfgang Schäuble and his Dutch counterpart, Jan Kees de Jager, challenged Greek Finance Minister Evangelos Venizelos on both fronts.

Greece’s debt restructuring is planned to take the form of a bond exchange in which creditors holding some €200 billion ($259 billion) in debt swap their securities for new instruments with half the face value. The key sticking point is how much interest new bonds should pay.


The IMF and the stronger euro-zone countries are reluctant to permit high coupons, in part because they would have to lend Greece the money to pay them and in part because high interest burdens make it less likely the country can get its debt under control.

Mr. Venizelos said as he arrived that his country has “very constructive cooperation” with private-sector creditors and is ready to complete the deal. His ministry said in a statement that it expected to present a formal offer to creditors by Feb. 13.

But to have an offer, Greece needs an agreement, which it has been seeking for months. Talks heated up last week but slowed over the weekend and the creditor’s chief negotiators left Athens