ECB's Draghi: No Greek Debt Cut

European Central Bank (ECB) President Mario Draghi has jumped on the no-debt-cut-for-Greece bandwagon being driven by German Chancellor Angela Merkel whos said Athens will have to pay back all it owes to international lenders even though many analysts believe the level is so high that it’s unsustainable.
Draghi said allowing Greece to give a so-called “haircut” to public lenders as it did to private investors in 2011, stiffing them with 74 percent losses, would be construed as direct financing that is not allowed under the bank’s or European Union rules. “It is pretty clear that we cannot do monetary financing,” Draghi said.
International lenders estimate Greece could need up to 10 billion euros ($13.2 billion) more by September, as it struggles to plug a funding gap and is still foundering despite $325 billion in two bailouts.
Draghi said it was up to the Eurogroup of Eurozone finance ministers to decide on whether to extend the current aid program for Greece, and underlined that if they did so, then Greece must accept more conditionality clauses, such as austerity measures that Prime Minister Antonis Samaras, who has been pilloried for piling on pay cuts, tax hikes and slashed pensions, said he would never do again, although he said that before and did.
Draghi’s comments come after Eurogroup chief Jeroen Dijsselbloem said earlier during the day that it was “realistic” to assume Greece will need additional money from the rest of the Eurozone. The ECB left its main interest rate on hold earlier on Sept. 5, as activity in the Eurozone recovers, but at a slow pace.
“I can’t share (markets’) enthusiasm, this is just the beginning. These shoots are still very green,” Draghi said, with regards to economic activity in the region. Speaking at a news conference, he reiterated the ECB’s decision to keep interest rates low for an “extended period of time”.
“Our monetary policy stance will remain accommodative for as long as necessary, in line with the forward guidance provided in July. The Governing Council confirms that it expects the key ECB interest rates to remain at present or lower levels for an extended period of time,” Draghi said.
Draghi said the ECB had upgraded its outlook for the euro zone, and now expected the economy to contract by 0.4 percent in 2013, before expanding by 1.0 percent in 2014. This was an improvement on June, when the ECB had forecast a contraction of 0.6 percent for this year, followed by 1.1 percent growth next year.
Recent economic reports point to a clear improvement in the Eurozone, but analysts have warned that it is still far too early to give the region the all-clear. “Confidence indicators out to August confirm the expected gradual improvement in economic activity from low levels,” Draghi said.