The European Union and International Monetary Fund, backed by the German government, are ready to accept a “soft” debt restructuring by Greece after acknowledging that its rescue plan isn’t working, according to an advance issue of the German newspaper “Die Welt.”
However, any such step still faces stiff opposition from France and from the leadership of the European Central Bank. In a speech delivered in Aachen on Friday, Juergen Stark, Germany’s most senior representative on the ECB’s board, vigorously rejected any move to a restructuring, saying it would carry “massive risks” for the euro zone as a whole, and wouldn’t solve the underlying problems of the countries in question.
“The economic and structural problems underlying the crisis wouldn’t be solved by a debt reduction,” Stark said, adding that it is “false” to assume that Greece or any of the other countries currently receiving aid under adjustment programs is insolvent.
He admitted only that “it is in the nature of things that the positive effects of structural reforms only become clear after a certain delay.”
A debt restructuring would “far rather weaken the incentives for the affected governments” to solve their problems, he said, “especially if there is strong political resistance.”
“Die Welt” cited sources as saying that the EU Commission had changed its mind about the sustainability of Greece’s debt. The Commission has so far been opposed to any form of restructuring.
“Die Welt” didn’t specify whether the “soft,” that is, voluntary, restructuring envisaged would require investors to accept a loss of their principal, or merely to wait longer for repayment.
(source: Dow Jones, ecb.int)
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