Thursday, May 19, 2011


The European Central Bank has criticised proposals for a possible restructuring of Greek sovereign debts, laying bare a behind-the-scenes row between ECB technocrats and European Union politicians over Greece’s debt crisis.

The ECB officials warned that any move to delay repayments would be a dangerous distraction from Athens’ economic and fiscal reform plans.

This month Jean-Claude Trichet, ECB president, walked out of a meeting hosted by Jean-Claude Juncker, Luxembourg’s prime minister. According to people familiar with events at the meeting, Mr Trichet was angry at talk of a so-called “soft” restructuring that could involve an extension of Greek debt maturities.

After a meeting of eurozone finance ministers on Monday, Mr Juncker said a soft restructuring of Greek debt would be an option once Athens had taken further steps to bring its public finances under control.

Lorenzo Bini Smaghi, an ECB executive board member, responded on Wednesday, saying: “Given how markets work, one should beware of using meaningless phrases, as Greece will then have to pay a price.”

The ECB fears a soft restructuring would be seen as a precursor to a “hard” restructuring and spook markets across the eurozone. ECB officials instead want Greece to accelerate its privatisation programme. Mr Bini Smaghi said Athens needed to “convince its citizens to pay taxes” and “retire at 65 as everyone else does in the western world”.

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