Sarkozy wants burden to be shared
French president calls for ‘formula’ involving investors; others see ECB fears as being unfounded
French President Nicolas Sarkozy said yesterday that bondholders need to share the burden of solving Greece’s fiscal woes. His comments followed those made by a German official on the issue of restructuring Greek debt.
Sarkozy called for a “formula” involving investors, adding to talk that Europe might engineer an extension of Greece’s debt repayment schedule or press bondholders to buy new bonds as old ones mature.
“Restructuring is a poorly used word,” the French president told reporters after a Group of Eight summit in Deauville, France. “If it means that we can think of ways for the private sector, private operators, to take on a share of the burden, it’s not restructuring at all; then there are formulas, there is no problem, and we should then converge in that direction.”
Saddled with Europe’s heaviest debt load, Greece is seeking additional loans after last year’s 110-billion-euro European-led package failed to dig it out of its fiscal hole. The European Central Bank has led the charge against a restructuring, warning of a domino effect in European markets.
Yesterday, a leading member of German Chancellor Angela Merkel’s party said ECB fears that rolling over the maturities of Greek debt could spark turmoil in the euro region may be unfounded.
Michael Meister, the Christian Democratic finance policy spokesman in parliament, said Greece’s creditors may accept an extension of bond maturities if the Greek government adopts a more aggressive approach to cutting debt.
“If Greece takes steps that signal to capital markets that something’s being done to lessen the risk for capital markets and creditors, then we’re not talking about coercive measures affecting creditors, we’re talking about joint contributions toward taking some of the risk out of the market,” Meister told Bloomberg. His comments underline the view of Germany, the euro region’s biggest contributor to Greece’s bailout last year, that the Greek government has untapped potential to cut its debt and that Merkel won’t be pressed into ruling out options ahead of a Greek asset sales drive.
Greek 10-year bonds are trading at less than 55 cents on the euro, a sign of investors’ diminishing expectations of being repaid in full.