THE EUROPEAN Central Bank (ECB) has rejected a softening of the EU’s stance towards Greece, saying that Athens’ problems cannot be solved by restructuring.
In a sign of the divisions at the heart of the Eurozone, ECB board member Juergen Stark said yesterday: “It is an illusion to think that a debt restructuring, haircut or whatever kind of rescheduling would help resolve the problems this country faces.”
Stark, who is also head of the Bank’s negotiating team in Athens, added that Greece “is solvent” if it implements fiscal cuts and privatisations and that a restructuring would “create a catastrophe” for Greek banks.
Fellow ECB board member Lorenzo Bini Smaghi also lashed out at the European Commission’s attempt to characterise another Greek rescue as a “reprofiling” or “soft restructuring” of its debt: “Given how markets work, one should beware of using meaningless phrases, as Greece will then have to pay a price,” he said.
The ECB’s criticism comes just a day after EU officials admitted for the first time that a “voluntary extension of loan maturities, a so-called re-profiling” is on the table. Any voluntary restructuring will require the ECB’s cooperation, however, since it is one of Athens’ biggest creditors.