ECB steps up rhetoric against Greek restructuring

Associated Press
May 19, 2011

The European Central Bank has stepped up its opposition to proposals that Greece not pay its debts on time — deepening a split with other top European officials over how to combat the eurozone's debt crisis.

Juergen Stark, a member of the bank's top six-member executive council, has indicated that the central bank would cut off Greek banks from emergency credit support in case of a restructuring — paying creditors later or less than the full amount.

That is a fierce rebuttal of comments by other top EU officials, who said they would not exclude a voluntary stretch-out of bond repayments.

Cutting off Greek banks would probably lead to bank failures, analysts say, as many of them depend on the central bank's emergency aid for day-to-day survival. ECB funding has been critical to pulling Greek banks through the crisis; the bank has permitted Greek bonds as collateral, despite ratings downgrades that under normal circumstances would have excluded them.

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