Eurozone Seeks Short-Term Financing for Greece

By Viktoria Dendrinou 
        BRUSSELS--Eurozone governments were racing to find a way to get 
Greece some desperately needed short-term financing within the next few days, 
but legal and political obstacles were complicating the effort, European 
officials said. 


        A deal struck Monday by eurozone leaders on a new rescue loan for 
Greece foresees the debt-burdened state implementing tough economic overhauls 
and budget cuts in exchange for as much as EUR86 billion ($96 billion) in new 
loans. 


        But before the new bailout agreement is completed, Greece needs some 
EUR7 billion by Monday to avoid defaulting on bonds held by the European Central 
Bank and to clear some EUR2 billion in arrears owed to the International 
Monetary Fund. 


        If Athens fails to pay the ECB, the central bank is widely expected 
to cut off emergency liquidity to Greek banks. This would cause them to 
collapse, making it almost inevitable that the Greek government would have to 
print a new currency to restart them. 


        Senior officials from eurozone finance ministries were discussing 
options for so-called bridge financing, although they said the proposed 
solutions either face opposition from some governments or come with legal or 
technical difficulties. 


        "All options are quite difficult and have certain legal, political, 
financial complications," said Valdis Dombrovskis, the European Commission vice 
president in charge of the euro. 


        The eurozone finance ministry officials were later joined by their 
counterparts from non-eurozone countries, as one of the options discussed 
concerned tapping some of the EUR13 billion left in the European Financial 
Stabilization Mechanism, an EU-wide rescue fund backed by the bloc's budget. 



        While this option would allow for a quick disbursement to Greece, 
officials have cautioned it will be difficult to get the green-light from 
non-eurozone governments, which want to steer clear of any further eurozone 
bailouts. 


        "Britain is not in the euro so idea that British taxpayers will be on 
line for Greece is a complete non-starter," U.K. Treasury Chief George Osborne 
said on his way in to the meeting. 


        Sweden, Denmark and the Czech Republic--none of which uses the 
euro--voiced similar objections, officials said. 


        Still, the decision to use the fund could be taken by a qualified 
majority--a majority of member states representing at least 65% of the bloc's 
population. 


        But while the opposing countries could be outvoted, it would be a 
politically risky move for the rest of the bloc, especially ahead of the U.K. 
referendum on its EU membership due to take place before the end of 2017. 


        Other options have been equally problematic. One would be to transfer 
roughly EUR3.5 billion in profits on Greek government bonds held by eurozone 
central banks to Athens. But several governments, including Germany and Finland, 
opposed this idea, arguing such a transfer could be granted only in exchange for 
stricter overhauls than the ones Greece has pledged to implement over the coming 
days, officials said. 


        Other options would be to use EU structural funds--normally earmarked 
for development projects--or to use Greek assets, such as its stake in the state 
telephone company, as collateral for eurozone loans. Neither solution would on 
its own yield enough money. 


        Eurozone governments could also lend Athens bilaterally, officials 
said, although no state has put its hand up to do so. 


        Officials remained optimistic that, despite the difficulties, a 
solution will be found. The alternative--default by Greece--would have major 
financial implications for the country and would derail the deal struck by 
eurozone leaders. 


        "The optimist in me says never underestimate the capacity of European 
lawyers and economists to come up with a solution," said Finnish Finance 
Minister Alexander Stubb. "It would be probably impossible to back down at this 
stage, so some kind of a solution will have to be found." 


        Write to Viktoria Dendrinou at viktoria.dendrinou@wsj.com 


        (END) Dow Jones Newswires


        July 14, 2015 14:38 ET (18:38 GMT)

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