Greek banker warns against debt talk
By Renee Maltezou |
January 24, 2011, Monday
|
Print Edition
Print Edition
GREECE'S central banker said yesterday that talk of debt restructuring is hurting the country as it struggles to exit a huge fiscal crisis that has shaken the eurozone.
"I believe that even mere talk of debt restructuring hurts the country," Bank of Greece governor George Provopoulos told yesterday's Ethnos newspaper.
The finance ministry has repeatedly denied reports that it is in talks to restructure Greece's debt.
The debt-ridden nation is implementing austerity measures prescribed by the European Union and the International Monetary Fund in exchange for a 110 billion euro (US$148.9 billion) bailout.
Provopoulos said the negative impact of a debt restructuring would far exceed the short-term pain caused by the austerity measures Greece is implementing and added that banks and government bond holders would also be negatively affected.
"The political and economic impact of debt restructuring would far exceed the short-term pain of fiscal adjustment. Debt restructuring would spark an uncontrollable chain reaction which would start a new, long-term cycle of a lack of credibility for the future of Greece's economy," said Provopoulos, a European Central Bank Governing Council member.
"It would also have immediate and significant negative consequences on pension funds, banks and all those holding government bonds."
Greek banks have lost access to wholesale funding markets and have increasingly been relying on the ECB for their liquidity needs.
Provopoulos said that the difficulties the Greek banking sector is facing were triggered by the country's fiscal woes and that the banking sector will be very different once the crisis is over.
"The banking landscape after the crisis will be very different compared with the past and our banks will face challenges," he said.
"When banks return to -international markets they will face increased competition from governments, other banks and large corporations looking for liquidity."
"I believe that even mere talk of debt restructuring hurts the country," Bank of Greece governor George Provopoulos told yesterday's Ethnos newspaper.
The finance ministry has repeatedly denied reports that it is in talks to restructure Greece's debt.
The debt-ridden nation is implementing austerity measures prescribed by the European Union and the International Monetary Fund in exchange for a 110 billion euro (US$148.9 billion) bailout.
Provopoulos said the negative impact of a debt restructuring would far exceed the short-term pain caused by the austerity measures Greece is implementing and added that banks and government bond holders would also be negatively affected.
"The political and economic impact of debt restructuring would far exceed the short-term pain of fiscal adjustment. Debt restructuring would spark an uncontrollable chain reaction which would start a new, long-term cycle of a lack of credibility for the future of Greece's economy," said Provopoulos, a European Central Bank Governing Council member.
"It would also have immediate and significant negative consequences on pension funds, banks and all those holding government bonds."
Greek banks have lost access to wholesale funding markets and have increasingly been relying on the ECB for their liquidity needs.
Provopoulos said that the difficulties the Greek banking sector is facing were triggered by the country's fiscal woes and that the banking sector will be very different once the crisis is over.
"The banking landscape after the crisis will be very different compared with the past and our banks will face challenges," he said.
"When banks return to -international markets they will face increased competition from governments, other banks and large corporations looking for liquidity."
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