ECB rejects soft restructuring option
The European Central Bank’s chief economist said yesterday a Greek debt restructuring would be a “recipe for catastrophe” as he blamed “vested interests” in Britain and the United States for fueling market pressure on the country.
Juergen Stark told a conference in Athens that the struggling eurozone country’s “debt sustainability is insured” if it fully complies with its internationally monitored austerity program.
Asked about the markets’ hostility to Greek efforts, Stark said: “This is not the view of all market participants, to be very clear. This is a discussion triggered from London and New York. I don’t know what is behind it – vested interests, people topping their books and so on. So it’s more complicated than just [saying] what markets expect.”
The Greek government was told by the European Union this week to take urgent measures to keep its austerity program on target, as part of its commitments for the 110-billion-euro package of bailout loans it is receiving from EU countries and the International Monetary Fund.
Stark’s comments underlined the split among European officials over whether Greece should consider delaying repayment of its crushing debt load. Jean-Claude Juncker, head of the eurozone finance ministers’ group, held the door open on Tuesday to what he called a “reprofiling” of Greek debt – a voluntary extension of bond maturities.
Another top European Central Bank official rejected any so-called soft restructuring of Greek debt, warning it could do much damage. Lorenzo Bini Smaghi, an Italian member of the ECB board, said at an event in Milan: “I reject a soft restructuring option for Greece. I don’t know what it means and we have to be very careful in giving signals to the financial markets, as they can react.”