Greek minister sees ESM solution for central bank bonds

Greece will be able to transfer bonds currently held by the European Central Bank to the European Stability Mechanism, its finance minister told parliament on Friday, as the government races to seal a bailout deal.

Transferring the bonds from the ECB to the ESM, a long-standing demand by the government of Prime Minister Alexis Tsipras, would allow Athens to avoid paying the central bank almost 7 billion euros from maturing bonds due over the next few weeks.

"What we asked for before, that Greek bonds held by the ECB… should go to the ESM, will happen," Finance Minister Euclid Tsakalotos said ahead of a vote by lawmakers on the latest proposals Greece has made to its creditors.

However it remained unclear how such a transfer would be possible. There is no legal way of swapping bonds directly from the ECB to the ESM although some commentators have suggested that Greece could obtain a loan from the ESM to pay for the maturing paper held by the ECB.

"Covering debt obligations can be part of a macroeconomic adjustment program supported by ESM financial assistance," a spokesperson for the fund said. There are no dedicated instruments in the ESM toolkit to swap sovereign bonds".

The leftist government is seeking parliamentary support for a package of reforms which will raise taxes and cut public spending in order to secure a cash-for-reforms deal that will allow Greece to remain in the eurozone.

[Reuters]