25 March 2015

Reuters: Greece not entitled to 1.2 billion euros from bank recap - EFSF

Euro zone officials agreed on Wednesday that Greece had no legal claim to 1.2 billion euros (884.2 million pounds) linked to a scheme for recapitalising banks, dashing Athens' hopes for what it calls a refund that would give the government a quick financial shot in the arm.

Greece believes it should get the 1.2 billion euros because it says it "overpaid" this amount by using a cash reserve of its own bank stabilisation fund, the Hellenic Financial Stability Facility (HFSF), to recapitalise Greek banks, rather than the bonds of the euro zone bailout fund EFSF.

"There was agreement that, legally, there was no overpayment from the HFSF to the EFSF. The EWG will consider how to move forward on this issue in due course," an EFSF spokesman said.

The recapitalisation in cash, rather than in EFSF bonds, was undertaken under the previous government of Antonis Samaras even though the HFSF still held 10.9 billion euros in EFSF bonds especially marked for that purpose.

Officials said the previous government might have used cash because it was easier than the formal procedure of unlocking EFSF funds for recapitalisation and also because Athens was profiting from interest on the EFSF bonds it held.

The new, leftist-led government of Alexis Tsipras, cut off from markets and desperate for revenue as debt repayments loom, would like to reverse that decision, and use some of the remaining EFSF bonds to recapitalise banks and take back its cash, which it could then use for other pressing needs.

But while the request had its merits, euro zone officials said, it was now legally difficult to accomplish because the 10.9 billion of EFSF bonds were transferred back from Greece to the bailout fund in late February after Athens lost the trust of euro zone governments.

The money remains available for Greek bank recapitalisation, but can only be disbursed on the explicit recommendation from the Single Supervisory Mechanism -- the pan-euro zone bank watchdog based in the European Central Bank.

Full article on Reuters

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