Germany Would Back Greece If It Sought Debt Restructuring, Minister Says
By Tony Czuczka - Apr 15, 2011 3:53 PM GMT+0200 Fri Apr 15 13:53:27 GMT 2011
A Greek debt restructuring “would not be a disaster” and
Germany would back a voluntary effort to ease the struggling euro member’s repayment terms, Deputy Foreign Minister Werner Hoyer said. The euro and Greek bonds fell after his comments.
The remarks by Hoyer were the most explicit by a European official showing a 110 billion-euro ($159 billion) bailout for Greece may fail to prevent the first default by a euro country. His message contrasts with Greek Prime Minister
George Papandreou’s pledge to avoid a restructuring.
Greece has “done a tremendous job in reforming the country,” Hoyer, who is minister for European affairs, said in an interview today in Berlin. “Whether all this is enough, whether the results will be there soon enough, is a different question. We are looking at the economic developments, the fiscal developments in
Greece and we are worried.”
Greek bonds extended their decline after Hoyer’s comments, with the 10-year yield jumping 54 basis points to 13.82 percent, widening the spread over benchmark German bunds to a record 1,041 basis points. The euro weakened versus 15 of its 16 most- traded peers, dropping 0.4 percent to $1.4425 and 0.9 percent to 119.94 yen.
“A haircut or a restructuring of the debt would not be a disaster,” said Hoyer, a member of the Free Democratic Party that’s the junior partner in Chancellor Angela Merkel’s government. If Greece’s creditors agreed that talks with the Greek government “would be helpful toward a restructuring of the debt, then of course this would be supported by us.”
Schaeuble Comments
German Finance Minister Wolfgang Schaeuble today sought to retreat from comments in an interview published yesterday in the German newspaper Die Welt suggesting Greece may have to seek a debt restructuring.
“The conclusions from it are somewhat misguided,” Schaeuble told reporters in
Washington today, when asked whether he was suggesting Greece needed to restructure a debt load of about 300 billion euros.
The questions over Greek finances came as Papandreou’s government promised to step up efforts to cut the
budget deficit, outlining 26 billion euros in new austerity measures and 50 billion euros in asset sales.
The
Finance Ministry in Athens said the sales will cut debt by 20 percentage points by 2015. The government will sell stakes in the country’s phone, power and gambling companies and airport to trim a debt load expected to peak at 159 percent of gross domestic product in 2012.
Greek Needs
“Greece’s problems won’t be solved by restructuring its debt but by restructuring the country,” Papandreou said today at a Cabinet meeting in comments broadcast by state-run Net TV. “Even if with the wave of a wand the debt disappeared, Greece in a few years would have debts again without these reforms.”
Backing Greek efforts, European officials have dismissed restructuring as a policy option.
European Union Economic and Monetary Affairs Commissioner
Olli Rehn said yesterday that a debt restructuring in the euro region could cause a ‘‘chain reaction through the banking sector,” calling the environment still “fragile.”
European Central Bank Executive Board member Lorenzo Bini Smaghi said he was frustrated by the debate on whether Greece, the first country to receive a bailout, will need to restructure its debt.
‘Devastating Effects’
“The most serious impact of a bankruptcy would be in the country that fails,” he said in an interview published yesterday with Italy’s Il Sole 24 Ore. “A debt restructuring would result in the failure of a large part of Greece’s banking system” and “the
Greek economy would be on its knees, with devastating effects on social cohesion and the maintenance of democracy in that country.”
Steffen Seibert, Merkel’s chief spokesman, said April 6 that Germany prefers Greece to pursue austerity measures tied to the bailout it received last year. “Under current conditions, there is no instrument for such a restructuring,” he said.
Still, with two-year Greek yields above 18 percent, investors are anticipating they’re not going to be repaid in full and on time.
“The issue of Greece is not whether there will be debt restructuring, but when it will be done,”
Nouriel Roubini, the economist who predicted the global financial crisis, said today at a conference in Almaty,
Kazakhstan’s financial center.
(Bloomberg)
***
Il punto sulla situazione con diversi commenti.
.
