Berlin sets in for fight with ECB
GERMANY has made an audacious attempt to seize the initiative in Greek bailout negotiations, telling the European Central Bank (ECB) that private investors in Athens’ debt must accept a seven-year increase in the maturity of their bonds.
In a letter sent to the ECB, German finance minister Wolfgang Schaeuble said: “Any additional financial support for Greece has to involve a fair burden-sharing between taxpayers and private investors.”
The ECB has repeatedly blackballed any attempt to introduce even a mild form of debt restructuring for private buyers of Greece’s debt. ECB board member Christian Noyer recently called the idea a “horror story”.
But Germany has dug in its heels, setting the stage for a pitched battle over the fate of the single currency. Schaeuble says a new bailout “has to lead to a quantified and substantial contribution of bondholders to the support effort.” He says the best solution is a seven-year increase in the maturity of all of Greece’s debt.
But the ECB is firmly against a restructuring, in part because of its own exposure to Greek debt after it bought up billions in an attempt to prevent the need for a bailout.
The think tank Open Europe estimates: “Should Greece restructure half of its debt, which is needed to bring down the country’s debt to sustainable levels, the ECB is set to face losses of €44.5 – 65.8bn (£39.6 – 58.6bn).”