Friday, November 30, 2012
All Equal Under the Bailout Sun?
Wall Street Journal
November 30, 2012
What one bailed-out country gets, the others should too. At least that was the principle set out by the euro zone. Greece, Ireland and Portugal–despite their many differences—would enjoy the same borrowing terms and conditions. This became the case when the three countries saw the interest rates on their bailouts from the European Financial Stability Facility lowered across the board to Euribor+1.5% last June.
Is this principle of equal treatment now to be abandoned? Let’s rewind to four days ago.
Under a deal struck between euro-zone countries and the International Monetary Fund last Tuesday, Greece is set to get some respite on its bailout terms. It won’t have to start paying interest until 2022 after a 10-year interest payment moratorium expires; it will get until 2042 instead of 2027 to repay its bailout to the euro-zone bailout fund; and the EFSF will charge Greece Euribor+0.5% instead of Euribor+1.5% for its loans. Further, the profits the European Central Bank makes on holdings of Greek-government bonds will be handed in to Greece via national central banks. Not too shabby, one might say, though as we explain here these concessions don’t solve Greece’s more existential problem.
And will the same apply to Greece’s bailout brethren? Based on a briefing by a senior euro-zone official, probably not.