May 3, 2011
Finance Minister George Papaconstantinou said a restructuring of Greece’s debt, causing losses for bondholders, would lock the country out of markets for a decade or more.
“A restructuring, a debt haircut, would be a huge mistake for the country,” Papaconstantinou said in an interview on state-run NET TV today. “It would have a tremendous cost, with no benefit. Greece would be out of markets for 10, 15 years.”
Greece, which received a 110 billion-euro ($163 billion) bailout last year, can rely on emergency loans from the euro area and the International Monetary Fund as well as Treasury- bill sales to meet its funding needs through 2011. Under the aid plan, Greece is supposed to regain market access next year and refinance at least three-quarters of its maturing medium- and long-term debt. Greece’s 10-year bond yield was at 15.5 percent as of 8:44 a.m. in London.
In March, euro-area leaders decided to let the European Financial Stability Facility purchase bonds directly from governments in an aid program. The plan to let the EFSF buy debt from governments depends on Greece sticking to the program to reduce its deficits, Papaconstantinou said.
“We must do what we said we would and what we should be doing anyway,” he said. He reiterated that any future decision by the EU and the IMF to further extend the repayment period of the bailout loans would be welcome.
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