Speaking on Friday (27 January) at the World Economic Forum in Davos, Economic and Monetary Affairs Commissioner Olli Rehn, said: “There is likely to be some increased need of official sector funding, but not anything dramatic.”
It was the first time the Commissioner acknowledged that more public money than the planned €130 billion – previously described by eurozone states including France and Germany as a red line not to be crossed – would be required for a second Greek bailout package.
The exact size of the shortfall has not been disclosed yet. Unconfirmed reports put the figure between €12-15 billion, bringing up the total needed to €145 billion.
An EU official explained that the gap would not hit the private creditors involved in the so-called Private Sector Initiative, or PSI deal. The exact shortfall would be calculated only after the PSI deal is completed, the official said.
Shortfall to be mopped up by EU and ECB
Rehn said that the additional shortfall would be borne by “the official sector and European institutions”. The Commission expects the burden to be shared between eurozone states and the European Central Bank. The ECB has so far refused to speculate that it may have to take a haircut on its Greek holdings.
The additional shortfall presents yet another issue to resolve in the complex Greek refinancing, however, just as the prospect of the PSI deal being completed before the heads of state summit on Monday appeared to recede.
Growth proposals amount to little
Rehn was optimistic that a deal with the banks could be concluded "in the coming days", saying: “We're quite close to a deal between the Greek government and the private sector community.” The deal, he added, should “preferably still [be concluded] in January, not February,” meaning before Wednesday.
An EU official said that issues surrounding Greece would not be discussed formally on Monday, but will be the “elephant in the room”.
The Commission today launched proposals to help member states use up €82 billion of unused project money from the cohesion funds to stimulate growth. This will be one of the key agenda items at the summit, but the EU official suggested it would alleviate the pain of the crisis without solving the core issue.
“It's like paracetamol to mend a broken arm,” the official said.
