(BN) EIB Said to Get Similar Exemptions From Greece Writedowns to ECB

Posted by on Feb 29, 2012 in Uncategorized | No Comments

This about sums it up.  The EIB, whose debt somehow doesn’t count against any of the countries that support it, also doesn’t take losses on debt it buys.  And why exactly does the EIB own Greek government bonds?




EIB Said to Get Similar Exemptions From Greece Writedowns to ECB
2012-02-29 00:00:35.0 GMT
     (For more on debt crisis click on EXT4.)


By John Glover and Esteban Duarte
     Feb. 29 (Bloomberg) — The European Investment Bank, the
development lender for the 27-member bloc, is getting a similar
exemption from Greek debt writedowns to the euro area’s central
bank, said two regional officials familiar with the matter.
     The European Central Bank negotiated a deal to avoid the
53.5 percent loss on principal that’s costing private investors
as much as 106 billion euros ($143 billion). The EIB, which
unlike its Frankfurt-based counterpart represents the entire
European Union, also owns Greece’s debt and is sidestepping the
so-called haircut in the same way, said the officials, who
declined to be identified because the plan isn’t public.
     “This continues the trend of burden-shifting,” said
Gabriel Sterne, an economist at London-based brokerage Exotix
Ltd. “This is bad crisis resolution and it’s going to affect
things for years to come.”
     The ECB bought Greek and other euro-region government debt
in an attempt to hold down borrowing costs amid the sovereign
crisis. Making private-sector investors effectively subordinate
to the claims of official bodies risks making it more expensive
for countries to borrow in the future.
     Peter Munro, the head of investor relations and marketing
at the EIB, declined to comment, as did a spokesman at the ECB.
     The Luxembourg-based EIB’s holding of Greek debt totals
more than 100 million euros and less than 1 billion euros, one
of the officials said.


                         ‘Risk Premia’


     “This bolsters the case for pricing in additional risk
premia in peripheral bond markets,” said Richard Mcguire, a
senior fixed-income strategist at Rabobank International in
London. “While the EIB’s holdings of Greek debt are small, if
true, this exception further underlines the unevenness of the
playing field.”
     The bank is the EU’s main development lender and is owned
by all its member states, while the ECB serves the 17-nation
euro area. The EIB invested 72 billion euros in 2010, about 88
percent of which was spent on projects within the EU, according
to its website. Vice President Wilhelm Molterer said in December
that the bank would cut lending this year amid the euro-region
     The EIB funds itself in the bond markets and raised about
$22.5 billion this year from benchmark issuance in dollars,
euros and pounds, according to data compiled by Bloomberg. The
bank has top credit grades from Moody’s Investors Service,
Standard & Poor’s and Fitch Ratings.
     “This is all politics,” said Sebastian Paris-Horvitz, the
chief market strategist at HSBC Private Bank Suisse SA in
Geneva. “Defaulting toward any official institution of the EU
would not fly well at this stage.”


For Related News and Information:
For Europe’s debt crisis: CRIS<GO>
Top bond stories: TOP BON <GO>
Top financial news: TOP FIN <GO>


–With assistance from Matthew Brockett in Frankfurt and Hannah
Benjamin and Abigail Moses in London. Editors: Paul Armstrong,
Andrew Reierson


To contact the reporters on this story:
John Glover in London at +44-20-7073-3563 or
Esteban Duarte in Madrid at +34-91-700-9606 or


To contact the editor responsible for this story:
Paul Armstrong at +44-20-7330-7185 or