ECB Resists Greek Debt Restructuring

Seeking Alpha
May 22, 2011

Lines are being drawn in the fight over how to handle the Greek fiscal crisis. The ECB and Greece are wrangling over a potential restructuring of Greek debt or an increase of financial aid to the country in return for further spending cuts and asset sales. Following comments from ECB executive board member Jürgen Stark, the ECB has chosen its side against a haircut.

An article from the FT Alphaville highlights Stark’s comments as the ECB would cease to accept Greek bonds as collateral for loans to Greek banks should Greece choose to restructure its sovereign debt. Stark was quoted as saying, “Sovereign-debt restructuring would undermine the eligibility of Greek government bonds.” Earlier comments in the week from EU officials warned a restructuring would be detrimental to the Greek banking system. Greek banks receive roughly 90B euros from the ECB in liquidity provisions.

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