May 17, 2011
European finance ministers for the first time floated the idea of talks with bondholders over extending Greece’s debt-repayment schedule, saying that last year’s 110 billion-euro ($156 billion) rescue has failed to restore the country to financial health.
Europe would consider “reprofiling” Greek bond maturities as part of a package including stepped-up sales of state assets and deeper spending cuts, Luxembourg Prime Minister Jean-Claude Juncker said late yesterday.
“We’ll have to see whether we can’t proceed to a soft restructuring of Greek debt,” Juncker, who chaired last night’s meeting of euro-area finance ministers, said at the Lisbon Council in Brussels today. “I am strictly opposed to a large restructuring of Greek debt.”
Introducing that prospect marks a break in Europe’s crisis- fighting strategy, with governments potentially shifting some costs to bondholders instead of relying on taxpayer-funded bailouts to stamp out the debt crisis. The talks were clouded by the absence of International Monetary Fund Managing Director Dominique Strauss-Kahn, who was denied bail in New York yesterday after being arrested on sexual-assault charges.
Previously, European governments had ruled out writedowns on privately held bonds before a permanent rescue fund is set up in mid-2013, and then only as a last-ditch option for countries deemed insolvent. Juncker last night said a “reprofiling” would give breathing space for Greek budget cuts to work.
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