Saturday, April 23, 2011

Euro Restructuring Could Overshadow Lehman-ECB's Stark

Reuters
April 23, 2011

A sovereign debt restructuring in a euro zone state could trigger a banking crisis worse than that unleashed by the collapse of Lehman Brothers, ECB Executive Board member Juergen Stark said.

In comments released on the Web site of German broadcaster ZDF on Saturday, Stark raised the spectre of the U.S. investment bank's famous collapse to underline the European Central Bank's opposition to Greece restructuring its mountain of debt.

"A restructuring would be short sighted and bring considerable drawbacks," he said. "In the worst case, the restructuring of a member state could overshadow the effects of the Lehman bankruptcy."

The bankruptcy of Lehman Brothers in September 2008 virtually froze credit markets and pushed governments into huge bailouts of their banking sectors.

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