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ESM not preferred creditor for three bailout states
Mon Jun 20, 2011 1:09pm EDT
* Policymakers adjust structure of permanent bailout fund
* No 'preferred status' for existing bailout recipients
* Decision should be positive for Ireland, Greece, Portugal
By Jan Strupczewski
LUXEMBOURG, June 20 (Reuters) - The euro zone's permanent bailout fund will not have preferred creditor status if it lends to Greece, Ireland or Portugal, but would get paid back first in other cases, euro zone finance ministers decided on Monday.
The permanent European Stability Mechanism (ESM) will come into effect in June 2013, replacing the temporary European Financial Stability Facility that was set up last year, and will have an effective lending capacity of 500 billion euros ($710 billion).
The initial agreement between euro zone countries was that all ESM loans, which will be provided to highly indebted governments in exchange for reforms, would enjoy preferred creditor status, junior only to the International Monetary Fund. EFSF loans are on equal footing with private creditors.
That would have meant that ESM loans would have to be paid back before private bondholders were -- a prospect that investors said was likely to discourage private creditors from buying the bonds of the three governments already forced to seek bailouts.
However, finance ministers have now agreed on a compromise to ease market concerns. ESM loans to the three -- Greece, Ireland and Portugal -- will not get preferential treatment.
At the same time, any euro zone member states that need emergency financial assistance from the ESM in the future would not benefit from the same exemption -- the ESM and IMF would still have to be paid back first. "It (the ESM) will not have preferred creditor status as regards countries that are already in a support programme ... It will make it easier for them to come back to the market," the chairman of euro zone finance ministers, Jean-Claude Juncker, told a news conference.
Irish Finance Minister Michael Noonan welcomed the compromise saying it would help Dublin return to market borrowing.
"We hope to complete our programme and get back into the markets in 2012 or 2013. But those that would be lending to us ... they would be cautious that we might have to go for a second programme under the ESM and the very prospect of it would stop them lending to us, because of the fact that they would be taking a bigger risk and the ESM would have the preferred status," Noonan told reporters.
"The ESM will have the same status as a creditor as anybody who lends to Ireland. That makes it easier for us to get back into the market," Noonan said.
"There should be people prepared to lend to us who won't be inhibited by incurring the greater risk from the ESM as originally drafted," he said.
The decision to remove the preferred creditor status of the ESM for Greece, Portugal and Ireland may also ease private sector creditors' concerns about rolling over Greek debt, a key sticking point of an expected second bailout package for Athens.
***
Questo è già un grande passo in avanti, anche se non ha ancora avuto il giusto risalto.
Mon Jun 20, 2011 1:09pm EDT
* Policymakers adjust structure of permanent bailout fund
* No 'preferred status' for existing bailout recipients
* Decision should be positive for Ireland, Greece, Portugal
By Jan Strupczewski
LUXEMBOURG, June 20 (Reuters) - The euro zone's permanent bailout fund will not have preferred creditor status if it lends to Greece, Ireland or Portugal, but would get paid back first in other cases, euro zone finance ministers decided on Monday.
The permanent European Stability Mechanism (ESM) will come into effect in June 2013, replacing the temporary European Financial Stability Facility that was set up last year, and will have an effective lending capacity of 500 billion euros ($710 billion).
The initial agreement between euro zone countries was that all ESM loans, which will be provided to highly indebted governments in exchange for reforms, would enjoy preferred creditor status, junior only to the International Monetary Fund. EFSF loans are on equal footing with private creditors.
That would have meant that ESM loans would have to be paid back before private bondholders were -- a prospect that investors said was likely to discourage private creditors from buying the bonds of the three governments already forced to seek bailouts.
However, finance ministers have now agreed on a compromise to ease market concerns. ESM loans to the three -- Greece, Ireland and Portugal -- will not get preferential treatment.
At the same time, any euro zone member states that need emergency financial assistance from the ESM in the future would not benefit from the same exemption -- the ESM and IMF would still have to be paid back first. "It (the ESM) will not have preferred creditor status as regards countries that are already in a support programme ... It will make it easier for them to come back to the market," the chairman of euro zone finance ministers, Jean-Claude Juncker, told a news conference.
Irish Finance Minister Michael Noonan welcomed the compromise saying it would help Dublin return to market borrowing.
"We hope to complete our programme and get back into the markets in 2012 or 2013. But those that would be lending to us ... they would be cautious that we might have to go for a second programme under the ESM and the very prospect of it would stop them lending to us, because of the fact that they would be taking a bigger risk and the ESM would have the preferred status," Noonan told reporters.
"The ESM will have the same status as a creditor as anybody who lends to Ireland. That makes it easier for us to get back into the market," Noonan said.
"There should be people prepared to lend to us who won't be inhibited by incurring the greater risk from the ESM as originally drafted," he said.
The decision to remove the preferred creditor status of the ESM for Greece, Portugal and Ireland may also ease private sector creditors' concerns about rolling over Greek debt, a key sticking point of an expected second bailout package for Athens.
***
Questo è già un grande passo in avanti, anche se non ha ancora avuto il giusto risalto.
Vabbeh meglio assisterle che non averle più. Ciao