Necessary restructuring?
June 8, 2011
In a letter in which he calls for Greece's national debt to be restructured, German Finance Minister Wolfgang Schäuble has said the eurozone is "facing the real risk of the first unplanned national bankruptcy."
The letter, which is not officially open, has been quoted in detail in the Wednesday editions of two major national papers in Germany.
According to daily Die Welt, Schäuble reportedly said the government in Athens would need more financial assistance than the 110 billion euros ($161 billion) in emergency loans currently promised, and that restructuring the country's 340-billion-euro national debt would also be necessary.
One potential method suggested by Schäuble, according to the daily Süddeutsche Zeitung, would be for current holders of Greek bonds to trade these in for new bonds that run for seven years. Süddeutsche also said Schäuble made no comment as to whether such a scheme should be voluntary or obligatory.
Both newspapers quoted Schäuble as saying that any extra help for Greece would only work if the private sector shared some of the burden with national governments.
The letter was officially addressed to Schäuble's European Union counterparts, European Central Bank boss Jean-Claude Trichet, EU Monetary Affairs Commissioner Olli Rehn and IMF acting managing director John Lipsky.
"A Greek return to the capital market in 2012, as is currently scheduled, seems more than unrealistic," Schäuble said in his letter, suggesting instead that a "substantial" expansion of the loans package would be necessary on the part of the EU and IMF alike. The existing Greek rescue deal would be fully paid out by the end of this year.
Rehn said Monday that he expects the bloc to agree to a new set of loans by June 20, shortly before the next EU summit in Brussels.
Obama echoes
US President Barack Obama, who received German Chancellor Angela Merkel on a state visit in Washington on Tuesday, also made strikingly similar suggestions. Obama urged the EU, IMF and private investors alike to make tough decisions on Greece, saying that bankruptcy in Europe could derail the fragile economic recovery in the US.
Greece's high debt level, Obama said, "means that other countries in the eurozone are going to have to provide them with a backstop and support. And frankly, people who are holding Greek debt are going to have to make some decisions, working with the European countries in the eurozone, about how that debt is managed."
Greece's so-called bailout is actually a package of interest-earning loans from the EU and IMF, offered at a typical interest rate for less debt-laden countries. It's a response to Athens' poor credit rating and subsequent inability to secure a competitive interest rate on the international markets.
Author: Mark Hallam (AFP, Reuters)
Editor. Martin Kuebler