Talk of debt re­struc­tur­ing ‘very dam­ag­ing’

Kathimerini English - - Business & Finance -

Euro­pean Cen­tral Bank Ex­ec­u­tive Board mem­ber Lorenzo Bini Smaghi said yes­ter­day that talk about Greece reneg­ing on debt com­mit­ments “has been very dam­ag­ing” and sug­gested “that in­vest­ing in the euro area is un­safe.”

Even for a coun­try that flouted eu­ro­zone fis­cal rules for a decade, “a debt re­struc­tur­ing, or ex­it­ing the euro, would be like the death penalty – which we have abol- ished in he said.

The ECB has bought about 45 bil­lion eu­ros in Greek gov­ern­ment bonds in the past year but Bini Smaghi said the im­pact of a de­fault would fall largely on eu­ro­zone na­tional cen­tral banks, rather than the ECB, and ul­ti­mately on tax­pay­ers.

“We care about tax­pay­ers’ money and this is why we warn against re­struc­tur­ing. We seem

the Euro­pean

Union,” to be the only ones,” he said.

Bini Smaghi added that a Greek re­struc­tur­ing would be noth­ing like those in Latin Amer­ica in the 1980s. The Greek sit­u­a­tion is “to­tally dif­fer­ent,” he claimed. An “or­derly” debt re­struc­tur­ing is “a fairy tale.”

His com­ments, pub­lished in the Fi­nan­cial Times, came just as Slo­vak Prime Min­is­ter Iveta Radi­cova said yes­ter­day that Greece’s debt needs to be re­struc­tured.

“A re­struc­tur­ing is nec­es­sary, but it’ll have to be de­cided how to do it,” Radi­cova told a joint news con­fer­ence with her Slove­nian coun­ter­part Borut Pa­hor.

Radi­cova said Greece was likely to re­quest more fi­nan­cial aid since much of the 110-bil­lion-euro bailout pro­vided by the Euro­pean Union and In­ter­na­tional Mon­e­tary Fund so far had been swal­lowed up by Greece’s debt re­pay­ment.

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