Greece could use state-owned real estate assets as collateral for new bonds to raise more than 100 billion euros ($138.7 billion), under a proposal put forward by a leading Greek think-tank and a former conservative minister.
Yannis Stournaras, the head of the Foundation for Economic and Industrial Research (IOBE), said on Saturday the plan had been submitted to the government and would allow Athens to convert a substantial share of its public debt into a new form of asset-backed bond.
The plan would enable Greece, which expects debt to amount to about 162 percent of gross domestic product this year and which has been shut out of bond markets, to reduce its public debt by 50 to 60 percent of GDP.
Stournaras said the plan was similar to a proposal by financial experts in Germany. The main difference between the two would be that his plan would be under Greek management and that Greece could regain ownership of the assets at any time by paying off the bonds.
Stournaras said the plan could provide an alternative to proposals that banks accept steeper losses on their holdings of Greek bonds than the 21 percent haircut so far agreed. He said it could be presented at a European Union leaders meeting on October 23.
From all the proposed plans which include a haircut and aim at averting a default, we believe that this is where the solution can be found. It should come from the use of state property, Stournaras told Reuters.
We believe the European Union should look for a solution in this direction and not in dangerous paths, such as a big haircut, which we believe will not make debt sustainable and would possibly create very dangerous situations.
The finance ministry could not immediately be reached for comment.
ALONE NOT ENOUGH
Greece is struggling to sell stakes in state-controlled firms and real estate to meet a downwardly revised target for privatization this year of 4 billion euros, a key term in a bailout sponsored by the European Union and International Monetary Fund.
In a joint statement earlier this week, EU, IMF and ECB inspectors, known as the troika, said they would recommend payment of a vital aid tranche but identified privatization and structural reforms as the weakest areas in which the debt-choked country should step up efforts.
Two Greek newspapers reported that under the proposed plan, Greece would set up as many as 15 companies and transfer real estate assets including land and public buildings to them.
The firms would then issue long-maturity bonds backed by the real estate assets. The bonds could be bought by private investors, banks or even the euro zone's rescue mechanism, the EFSF, the daily Kathimerini said.
Stournaras said the bonds could carry a coupon of less than 4 percent since they would be backed by assets and their maturity would be at least 15 years.
But he warned that his proposals would not be enough to solve Greece's debt problem.
If the troika and the foreigners accept such a proposal, the government can raise a lot of money very fast and repay debt, he said. But these proposals are not a panacea ... they should be combined with other policies.
Greece can repay the bonds when they expire or at any time it has the cash, Kathimerini said. If the country failed to repay the maturing bonds, these would turn into shares of the companies owning the assets and bondholders would take ownership of the firms.
($1 = 0.721 Euros)
(Reporting by Angeliki Koutantou, editing by Jane Baird)