Buying back debt on the cheap

Jörg Asmussen told the German national daily Süddeutsche Zeitung, that the goal of a Greek buy-back plan would be to get it on track to meet a key target set out in an international bailout.

"At the moment it looks like Greece's debt level will rise to well above the target of 120 percent of GDP by 2020," the German member of the European Central Bank's (ECB) executive board, said. "Thus, one has to consider elements that could make it possible to achieve that goal. One possibility would be buying back debt."

However, Asmussen, who spoke to the paper on the fringes of the annual meeting of the International Monetary Fund and the World Bank, declined to provide details on how this would work, apart from pointing out that Greek sovereign debt is currently being dealt at far below its face value.

According to the report, under the current market conditions, Greece would be able to buy back bonds nominally worth 100 euros at cut rates of 70 or even 50 euros, allowing it to reduce its debt ratio significantly.

The report also didn't specify who would finance such a program, but Asmussen did rule out any ECB involvement in such a scheme.

"It's quite clear that the ECB could not enact such a bond buy back," Asmussen said. "That would be a matter for the Greek government."

While the idea may sound good in theory, it may already be dead. Another national paper, the Frankfurter Allgemeine, which also reported on the story, quoted "government sources" who described the idea as unrealistic.

pfd/ch (dpa, Reuters)