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Updated | Tonio Fenech lambastes ‘speculative’ report claiming Central Bank recapitalisation

Policymakers tell Reuters European Central Bank may take 30% losses in second Greek debt restructuring.

Matthew Vella
27 July 2012, 12:00am
European central banks are expected to take losses on their holdings of Greek bonds – which means national governments accepting the losses.
Additional reporting by Karl Stagno-Navarra.

Malta could be forced to take significant losses on bond holdings with Greece, as European policymakers were reported to be working on "last chance" options to bring Greece's debts down and keep it in the eurozone.

Reuters reported that after private creditors and banks took big writedowns on their Greek bonds after the second bailout was issued to the beleaguered EU member states in February, now European central banks are expected to take losses on their holdings of Greek bonds - which means national governments accepting the losses.

Policymakers who spoke to the news agency said the latest aim is to reduce Greece's debts by a further €70-100 billion, so that Greek debt can come down to a manageable 100% of its gross domestic product.

"The favoured option is for the European Central Bank and national central banks to carry the cost, but that could mean that some banks and the ECB itself having to be recapitalised," Reuters quoted unnamed officials saying.

The ECB declined comment.

Two officials indicated that the French, Maltese and Cypriot central banks were most exposed to Greek government debt and would probably need a capital injection. Two other officials said the ECB could also need balance sheet support.



But Finance Minister Tonio Fenech lambasted the Reuters report that claimed Malta's central bank would have to be recapitalised in the case of a haircut.

"It is completely wrong and highly speculative. The Maltese government does not anticipate such a situation to happen, but even if things had to come to their worst, the CB's exposure to Greek bonds is minimal and the losses could be easily absorbed by the Central Bank's profits of just one financial year."

Fenech underlined the fact that Malta's exposure to Greek debt, in terms of governmnet-owned bonds, is quite low and minimal. Bonds are one aspect of the Greek debt, while guarantees pledged by EU member states are another.

In terms of its exposure to GDP, Malta is the EU's most exposed of member states to a possible Greek exit from the eurozone. Malta granted €56 million in bilateral loans to Greece and another €56 million was guaranteed in a second bailout through the European Financial Stability Facility. Japanese investment bank Nomura tagged Malta's total exposure as a percentage of its GDP at 4.3%, the highest of all EU states, followed by Estonia (4.2%), Slovenia (3.9%), and Slovakia (3.7%). The EU state with the lowest exposure is Luxembourg at 1.8% of its gross domestic product.

ECB officials believe cutting Greek debt by 120% of GDP by 2020 is not possible. One of the options is to write down the value of its government bonds held by central banks by 30% - a haircut, as it is termed.

The 30% haircut would amount to €70 billion.

Politically it may be easier for policymakers to get the ECB and national central banks to take a hit on their bond holdings, rather than eurozone governments which would mean that taxpayers suffered direct losses.

However, the process would still come with complications because it could mean that national central banks have to be recapitalised.

Total outstanding official-sector credits to Greece, which also includes bilateral loans extended to Greece by euro zone governments, is about €220-230 billion.

Matthew Vella

After graduating in anthropology he joined MaltaToday...
Nigel Lawrence
Tonio is right, everybody else is wrong. Again.
Fumarole
@tony fava Habib dawn kemm jaghtuna jghidulna. Qalulna li f'seba'snin se niehdu Biljun ewro. Kemm se nkunu tajnihom QATT ma jghidu. Niehdu 140 Miljun fis-sena. Mizata nhallsu 65 Miljun barra 72 Miljun ohra li nonfqu biex il-ligijiet u kull haga li tohrog mill-UE tinqaleb ghall-Malti, dan skont OPEN EUROPE, li QATT ma gie michud !!. Issa jekk tara kemm qed inhallsu ghall-imghaxijiet fuq id-djun BISS , tinduna li l-flus li jaghtuna lanqas biss iservu biex inhallsu dawn l-imghaxijiet : 230 Miljun ewro f'sena !!. Altru milli morna tajjeb . U ma ninsewx li fil-budget li gej tal- UE sa jnaqqsulna 500 Miljun ewro !!. Barra minn hekk wara l-2013 iridu jispiccaw is-sussidji KOLLHA fosthom tal-biedja u s-sajd. Povru poplu Malti. Imma la l-Gahan Malti ried hekk, x'tista' taghmel ?.
vc
Japanese investment bank Nomura tagged Malta's total exposure as a percentage of its GDP at 4.3%, the highest of all EU states - Qed taraw kif gvern jaghmel il-finanzi fis-sod........bid-dejn kollox possibbli.......
John Azzopardi
I have been saying this. What is happening now is that stable countries who participated in the bailout via their central banks will now also suffer the consequences and will see their economies weaken. I have been predicting this for a while now in my post. And how true it is. What banks are really doing is servicing debt of debtor nations to pay off interest on their debts, which are major banks in Germany, France, Spain, UK, Ireland. HOw sad indeed to see all this now happening and stable countries will be taken down.
parla piu piano
If I were RCC Tonio Fenech is an good canidate to replace JPO, i.e. the ideal scape goat to Gonzi's failure. Sorry with all due respect to the other MP's especially the Ministers, but Tonio is a favourate surpassing even Giovanna.
Andrew Spiteri
Imma kif dan il junior accountant - turned Finance Minisiter for lack of decent alternatives - dejjem ghandu ragun hu???
kop064
Hallas it taxxi poplu biex il gvern jaghmel garanziji lil griegi li huma falluti. Dawn il flus difficili biex nohduhom lura u irridu naghmlu tajjeb ahna ghalijhom bit taxxi.
Peter Bbarbara
...lambastes..? I think you mean lambasts..
eddy privitera
mela skond dan ir-rapport, Tonio Fenech jerga jispicca johrog ta' hmar, meta kien qalilna, li l-miljuni li suppost slifna lill-Grecja kienu biss SELF U NIBDEW NIRCIEVU L-IMGHX !!! Ghidilna kemm ircevejna imghax sal-lum ?? DAN IL- BNIEDEM MA JGIBX PREVIZZJONI WAHDA TAJBA !!!!
tony fava
Darba wahda kienu qalululna li jekk nidhlu fl-EU, il-hajja taghna kienet se tkun rebbiegha dejjem. Kienu qalulna ukoll li l-EU kienet se taghtina 100 miljun LIRA fis-sena. Imma dawn in-nies baqalhom zejt f'wicchom . Kemm se jdumu jitmellhu bin-nies ????
Anthony Azzopardi
Whatever happened to the cheerleaders who could not wait to sing the praises for joining the Euro? These are the same chatterboxes that convinced the Maltese people that Alfred Sant was delirious when he suggested the rush to the Eurozone was perilous. The shameful truth to all this financial turmoil are the facts that Gonzipn could not do enough to appease the EU and jumped into the deep end of a financial quick sand at the detriment of the Maltese tax payers. Maltese exposure should have been limited to the same state as Luxembourg but I guess the burden of proof what a great consultancy job the Maltese office in Brussels was engaged in; will come when this island is counting its losses.
Alex Grech
Maltese suffering direct losses for Greece.Never mind, it doesn't matter poor poor politicians everyone makes mistakes.The only way to pay off all debts is PRINTING MONEY.
GRACE PAVIA
So is it official? Are Maltese taxpayers seeing their "investment" in Greece (caused by their version of "money no problem") thrown away to the tune of a third?
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