Noyer Rules Out Greek Debt Restructuring, Says Austerity Is Only Solution

Bloomberg
May 24, 2011

European Central Bank Governing Council member Christian Noyer ruled out a restructuring of Greece’s debt, calling it a “horror story” that would leave the nation shut out of financing for years.

“There’s no solution possible” for Greece other than its austerity program, Noyer, Bank of France governor, told reporters in Paris today. “Restructuring is not a solution, it’s a horror story.” If the country fails to meet the terms of its bailout, Greek government debt will be “ineligible as collateral” at the ECB, he said.

ECB leaders and European Union policy makers are clashing over how to prevent the currency region’s first default, after 256 billion euros ($360 billion) in bailouts to Greece, Ireland and Portugal failed to stop contagion from the debt crisis. A year after its 110 billion-euro rescue, Greece remains shut out of financial markets and the cost of insuring its debt against default is at a record high.

“The lengthening of maturities raises very difficult questions,” Noyer said. “There’s a strong chance it will be the equivalent of a default.”

Credit-default swaps on Greek debt increased 96 basis points to 1,496 today, after Prime Minister George Papandreou’s government backed a new package of spending cuts and state-asset sales yesterday. The yield on the country’s 10-year bond was down 18 basis points at 16.85 percent.

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