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Eurozone has no plan to halve Greek debts
Source: Agencies |
September 27, 2011, Tuesday
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Print Edition
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EUROZONE officials played down reports yesterday of emerging plans to halve Greece's debts and recapitalize European banks to cope with the fallout, stressing that no such scheme is yet on the table.
Europe came under fierce pressure from the United States and other major economies at weekend talks in Washington to take swift, decisive action to stop the Greek debt crisis engulfing bigger eurozone states and derailing world economic recovery.
But officials said media reports that planning was already in place for a 50 percent writedown in Greek debt and a vast increase in the eurozone rescue fund, the European Financial Stability Facility were highly premature.
"There is no change to the framework we are working on," said an official who is involved in decision-making on financial aid to Greece, Ireland and Portugal.
"All this talk of a specific haircut for Greece or an enlargement of the EFSF, it is all just speculation. We are not working along those lines," said the official.
German Chancellor Angela Merkel, struggling to convince her fractious center-right coalition to back a strengthening of the EFSF in a crucial vote on Thursday, said on Sunday that letting Greece default would destroy investor confidence in the eurozone.
Diplomats said any talk of a fallback plan for Greece that would raise the cost to German taxpayers could only make her task more difficult in parliament this week.
Private economists and Brussels think-tanks are forecasting a Greek debt default within months or sooner, coupled with a capital injection for European banks and a 'leveraging up' of the EFSF so that it can handle fallout in Italy and Spain.
Eurozone officials admit that such policy ideas are circulating and some could constitute a longer-term response to the 20-month debt crisis. But they insist no specific plans are in the works.
Instead, planning continues on the basis that Greece's debt burden, which is close to 160 percent of GDP, can be sustained as long as the government fully implements austerity measures.
Europe came under fierce pressure from the United States and other major economies at weekend talks in Washington to take swift, decisive action to stop the Greek debt crisis engulfing bigger eurozone states and derailing world economic recovery.
But officials said media reports that planning was already in place for a 50 percent writedown in Greek debt and a vast increase in the eurozone rescue fund, the European Financial Stability Facility were highly premature.
"There is no change to the framework we are working on," said an official who is involved in decision-making on financial aid to Greece, Ireland and Portugal.
"All this talk of a specific haircut for Greece or an enlargement of the EFSF, it is all just speculation. We are not working along those lines," said the official.
German Chancellor Angela Merkel, struggling to convince her fractious center-right coalition to back a strengthening of the EFSF in a crucial vote on Thursday, said on Sunday that letting Greece default would destroy investor confidence in the eurozone.
Diplomats said any talk of a fallback plan for Greece that would raise the cost to German taxpayers could only make her task more difficult in parliament this week.
Private economists and Brussels think-tanks are forecasting a Greek debt default within months or sooner, coupled with a capital injection for European banks and a 'leveraging up' of the EFSF so that it can handle fallout in Italy and Spain.
Eurozone officials admit that such policy ideas are circulating and some could constitute a longer-term response to the 20-month debt crisis. But they insist no specific plans are in the works.
Instead, planning continues on the basis that Greece's debt burden, which is close to 160 percent of GDP, can be sustained as long as the government fully implements austerity measures.
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