9 February 2012, 18:41  Greese: agreement is reached

A deal has been reached among Greek political leaders on additional austerity measures demanded by EU-IMF creditors in return for a loan bailout, European Central Bank chief Mario Draghi said Thursday. Draghi told a news conference that he had received a phone call from Greek Prime Minister Lucas Papademos just minutes earlier and "he told me that agreement has been reached and has been endorsed by major parties." Quizzed about the possibility that the ECB could take losses on its holdings of Greek government bonds, which it has amassed under its controversial bond-buying programme, Draghi refused to be drawn on the issue. But he pointed out that the ECB is "not a negotiating party" in the talks between Greece and its creditors over a write-down of its private held debt. "Everybody has been talking about what the ECB could or could not do. But the ECB hasn't said anything," he said. Nevertheless, "it's not our intention to violate the prohibition on monetary financing," he insisted, referring to a policy whereby a government in effect prints money to boost liquidity. "All this talk about the ECB sharing the losses (is) unfounded," Draghi said, added that "the vibrations that we're getting is that the parties are pretty close to an agreement." Greece's private creditors are being asked to write off about half of the 200 billion euros' worth of government bonds they hold to help cut the country's total debt burden to a sustainable level. The ECB has come under pressure to take losses on the Greek government bonds it holds as the restructuring by private creditors is unlikely to bring down Greece's debt to the target of 120 percent of GDP in 2020 from 160 percent at present. On Wednesday, the Wall Street Journal said the ECB had agreed to exchange the government bonds it purchased in the secondary market last year at a price below face value, provided the debt-restructuring talks have a successful outcome. The ECB bought the bonds beginning in May 2010 in an effort to push down borrowing costs for Athens. The effort failed and Greece has in effect been locked out of the bond markets ever since, relying on funds from a first bailout in May 2010 worth 110 billion euros.

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